For personal use only - ASX · Until his resignation from office on 15 May 2012, Mr Barker was a non-executive director of Transerv Energy Limited. Mr Andrew Leibovitch – Executive

ABN 21 150 956 773

Annual Report 30 June 2014

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Sunbird Energy Ltd Annual Report 30 June 2014

Table of Contents

Corporate Directory ................................................................................................................................................. 3 Directors’ Report ..................................................................................................................................................... 4 Directors’ Declaration ........................................................................................................................................... 26 Independent Audit Report ..................................................................................................................................... 27 Independence Declaration ..................................................................................................................................... 29 Consolidated Statement of Profit or Loss and Other Comprehensive Income ......................................................... 30 Consolidated Statement of Financial Position........................................................................................................ 31 Consolidated Statement of Changes in Equity ....................................................................................................... 32 Consolidated Statements of Cash Flows ................................................................................................................ 33 Notes to the Consolidated Financial Statements ................................................................................................... 34

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES .................................................................................... 34 2. FINANCIAL RISK MANAGEMENT................................................................................................................... 46 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS ............................................................................... 49 4. SEGMENT INFORMATION ............................................................................................................................ 50 5. CORPORATE COSTS ...................................................................................................................................... 51 6. PROFESSIONAL FEES .................................................................................................................................... 51 7. TAXATION .................................................................................................................................................... 52 8. LOSS PER SHARE .......................................................................................................................................... 53 9. CASH AND CASH EQUIVALENTS .................................................................................................................... 53 10. TRADE AND OTHER RECEIVABLES................................................................................................................. 54 11. PROPERTY, PLANT AND EQUIPMENT ........................................................................................................... 54 12. EXPLORATION AND EVALUATION EXPENDITURE ......................................................................................... 55 13. TRADE AND OTHER PAYABLES ..................................................................................................................... 57 14. BORROWINGS .............................................................................................................................................. 57 15. SHARE CAPITAL ............................................................................................................................................ 59 16. RESERVES ..................................................................................................................................................... 60 17. INTERESTS IN OTHER ENTITIES ..................................................................................................................... 61 18. RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH OUTFLAW USED ............................................ 62 19. PARENT ENTITY ............................................................................................................................................ 63 20. RELATED PARTY TRANSACTIONS .................................................................................................................. 64 21. SHARE-BASED PAYMENTS ............................................................................................................................ 65 22. EVENTS OCCURRING AFTER REPORTING DATE ............................................................................................. 70 23. CAPITAL AND OTHER COMMITMENTS ......................................................................................................... 71 24. CONTINGENCIES ........................................................................................................................................... 71

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Corporate Directory

Directors Mr Kerwin Rana Executive chairman Mr William Barker Managing director Mr Andrew Leibovitch Executive director Mr Marcus Gracey Non-executive director

Company Secretary Chief Financial Officer

Mr Mark Balfour (resigned 11 July 2014) Mr Richard Barker (appointed 11 July 2014) Ms Carla Mackay (resigned 12 September 2014)

Registered Office Level 1, 50 Ord Street West Perth WA 6005 Tel: +618 9463 3260 Fax: +618 9463 6630

Share Register Link Market Services Limited Level 4 Central Park 152 St Georges Terrace Perth WA 6000 Tel (within Australia): 1300 554 474 Tel (outside Australia): +612 8280 7111

Stock Exchange Listings Australian Securities Exchange (ASX: SNY)

Auditor BDO Audit (WA) Pty Ltd 38 Station Street Subiaco WA 6008

Solicitors Hardy Bowen Level 1, 28 Ord Street West Perth WA 6005

Website www.sunbirdenergy.com

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http://www.sunbirdenergy.com/


Directors’ Report

The directors of Sunbird Energy Ltd (“the company”) present their report for the financial year ended 30 June 2014.

1. DIRECTORS, COMPANY SECRETARY AND CHIEF FINANCIAL OFFICER

The directors and the company secretary of the company at any time during or since the end of the financial year are as follows. Directors Mr Kerwin Rana - Executive Chairman (Appointed 12 October 2011)

Mr Rana graduated from the University of Natal in 1995 with a Bachelor of Science (Chemical Engineering) degree and is a registered professional engineer, Pr. Eng., with the Engineering Council of South Africa. He has more than 17 years of mining industry experience gained through various executive and managerial roles including being the Head of New Business for the De Beers group in South Africa and the General Manager of De Beers’ Kimberley Mines. Mr Rana is a managing director and a minority shareholder of Umbono, primarily responsible for its energy and bulk commodity business. Mr Rana also acts as Umbono’s Government Relations Executive, with key relationships across the different spheres of the relevant Government Regulators. Mr Rana was formerly a non-executive director of the South African Diamond and Precious Metals Regulator and an active member of the South African Institute of Directors. Mr Rana isn’t a director of any other ASX-listed entities at present, or in the last 3 years. Mr William Barker - Managing Director (Appointed 17 May 2011)

Mr Barker is a Geologist with extensive experience in the exploration and development of gas projects in Australia and internationally. He holds a Bachelor of Science majoring in Geology from the University of Western Australia.

Mr Barker's previous roles include General Manager LNG for Arrow Energy Ltd, where he was responsible for the overall management of the company's lead LNG export project. The maturing of the Surat Gas Project to Final Investment Decision was instrumental in triggering the A$3.5 billion takeover of Arrow Energy by Royal Dutch Shell and PetroChina in August 2010.

Mr Barker was also the Operations Manager for New Guinea Energy Limited, managing the company's conventional petroleum exploration activities in Papua New Guinea. His experience covers exploration and development activities, corporate relations, business development and general management. He has served as a member of the Coal Geology Council of New South Wales, and is a member of the Petroleum Exploration Society of Australia.

Until his resignation from office on 15 May 2012, Mr Barker was a non-executive director of Transerv Energy Limited. Mr Andrew Leibovitch – Executive Director (Appointed 17 May 2011)

Andrew Leibovitch is a Chartered Accountant with more than 20 years’ experience in corporate finance and the resources industry. He has experience in strategic planning, business development, acquisitions and mergers, gas commercialisation, project development and general management. Prior to Sunbird Energy, Mr Leibovitch was running his own energy consultancy business, where he had significant involvement in several Australian offshore and unconventional gas projects, including advising Origin Energy Limited, Arrow Energy Limited and LNG Ltd.

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Sunbird Energy Ltd Annual Report 30 June 2014 Directors’ Report 1. DIRECTORS, COMPANY SECRETARY AND CHIEF FINANCIAL OFFICER (continued) Previously, Mr Leibovitch was General Manager Browse Gas Project for Woodside Petroleum Limited. He was responsible for the overall management of the company's Offshore Browse Basin Gas to LNG export project offshore Western Australia. Mr Leibovitch was also General Manager Eastern Australia Gas Business Unit for Woodside, responsible for the company's oil and gas exploration and development portfolio in eastern Australia, which included the appraisal and development of the Otway Gas Project offshore Victoria. Mr Leibovitch has also performed general management roles at Western Mining Corporation Limited and Coopers & Lybrand. Until his resignation from office on 15 May 2012, Mr Leibovitch was a non-executive director of Transerv Energy Limited. Mr Marcus Gracey – Non-Executive Director (Appointed 17 May 2011)

Mr Gracey is a corporate lawyer with extensive international experience gained across various markets, including energy. His expertise and experience is backed by a strong set of academic and professional credentials which include a Bachelor of Economics, Bachelor of Laws, Master of Laws and an Executive Master of Business Administration. Having also completed the AICD International Company Directors Course and being a qualified Chartered Company Secretary,, Mr Gracey has developed a strong skill set built around risk management, strategy and compliance. Mr Gracey was previously a director of Torrens Energy Limited and is presently the Business Development Manager and General Counsel of New Standard Energy Limited, focussed on developing and producing onshore unconventional oil & gas in Texas, along with oil & gas exploration activities in the Cooper, Carnarvon and Canning Basins in Australia . Details of Company Secretary and Chief Financial Officer Mr Mark Balfour – General Counsel & Company Secretary (Appointed 18 April 2013 – Resigned 11 July 2014) Mr Balfour is a Commercial and Resources Lawyer with nearly 30 years’ experience in private legal practice, in-house counsel roles and executive directorships in both listed and unlisted resources companies with assets variously in Australia, South Africa, North America, Indonesia, China and Papua New Guinea. Mr Balfour fulfilled the course of legal studies at the Law Faculty of the University of Western Australia necessary to be admitted a Barrister and Solicitor of the Supreme Court of Western Australia and registered on the roll of practitioners with the High Court of Australia in 1985. He subsequently completed an intensive course for Lawyers in negotiation at Harvard Law School, Cambridge, Massachusetts in 1991. As Company Secretary for various listed and unlisted public companies and their subsidiaries in the past 10 years, Mr Balfour has had responsibility for corporate governance in various jurisdictions including Australia, North America, Channel Islands, Papua New Guinea and the Republic of South Africa. Mr Balfour resigned his office as Company Secretary effective 11th July 2014 and his office as General Counsel effective 31st July 2014. Mr Richard Barker – Company Secretary (Appointed 11 July 2014) Mr Barker is a solicitor with over 15 years’ experience working for some of Australia’s top law firms in Sydney and Perth. Mr Barker holds both a Bachelor of Laws Degree and a Master of Laws Degree (Intellectual Property). For the last 3 years Mr Barker has worked in the oil and gas industry, both in Australia and internationally providing corporate consultancy and risk management services. Mr Barker has also acted as Assistant Company Secretary for Sunbird during this time.

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Sunbird Energy Ltd Annual Report 30 June 2014 Directors’ Report 1. DIRECTORS, COMPANY SECRETARY AND CHIEF FINANCIAL OFFICER (continued) Ms Carla Mackay – Chief Financial Officer (Resigned 12 September 2014) Located in South Africa, Ms Mackay is a Chartered Accountant, with extensive experience in the areas of banking and mining. Ms Mackay graduated from the University of Johannesburg with a BCom (Honours) in Accounting and completed her articles at the audit firm, KPMG, being promoted to Audit Manager in the Industrial, Automotive and Pharmaceutical division. Following this she held the position of Deputy Chief Executive Officer of One Stone Capital (OSC), Old Mutual’s black economic empowerment partner. She played a key role on the Executive Committee of Old Mutual Global Index Trackers (Pty) Ltd in the period during which the company listed five exchange traded funds tracking emerging market indices on the NYSE Arca exchange in 2010. In her most recent capacity prior to her role at Sunbird Energy as Chief Operating Officer of Sunbird’s South African partner, Umbono, she has performed an executive management role in development of the Umbono group’s portfolio of resource projects, primarily in its energy and bulk commodity business. She was also involved in the sale transaction with and ultimate listing of Sunbird in January 2012. Ms Mackay resigned from Sunbird and her role as Chief Financial Officer effective 12 September 2014. The Company intends to manage the finance roles with within the existing management staff and has no immediate intention to appoint a new Chief Financial Officer. 1.1 Directors’ Meetings The number of directors’ meetings and number of meetings attended by each of the directors of the company during the financial period were:

Director Board of directors

Present Held Kerwin Rana 4 4 William Barker 4 4 Andrew Leibovitch 4 4 Marcus Gracey 4 4

During the reporting period, the directors also met or communicated as a collective group at least bi-weekly and on numerous of these occasions to discuss and consider governance and operational strategies and resolutions. The directors executed twelve (12) circular resolutions during the period, arising out of matters discussed and considered in these informal meetings and communications and to evidence the formal resolutions made by them in respect to such matters.

1.2 Corporate Governance In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Sunbird Energy Ltd support and have adhered to the principles of sound corporate governance. The board recognises the recommendations of the Australian Securities Exchange Corporate Governance Council, and considers that the company is in compliance with those guidelines which are of importance to the commercial operation of a junior listed resource company. During the financial year, shareholders received the benefit of an efficient and cost-effective corporate governance policy for the company.

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Sunbird Energy Ltd Annual Report 30 June 2014 Directors’ Report 2. REMUNERATION REPORT - AUDITED

This Remuneration Report outlines the remuneration arrangements which were in place during the year, and remain in place as at the date of this report, for the directors and key management personnel of Sunbird Energy Ltd (“the company”). (a) Key management personnel

Directors of the company, who had authority and responsibility during the financial period for planning, directing and controlling the activities of the group, directly or indirectly, as well as other senior executives are the key management personnel disclosed in this report. Name Position

Company Directors Kerwin Rana Executive Chairman William Barker Managing Director Andrew Leibovitch Executive Director Marcus Gracey Non-Executive Director

Senior Executives Nathan Rayner Technical Director Mark Balfour General Counsel and Company Secretary Carla Mackay Chief Financial Officer

(b) Non-executive director remuneration policy

Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors’ fees and payments are reviewed annually by the board. The base remuneration of directors is set at A$50,000 per annum commencing from 30 April 2013. Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at A$300,000 per annum and was approved by shareholders at the general meeting on 12 October 2011. (c) Executive remuneration policy and framework

In determining executive remuneration, the board aims to ensure that remuneration practices are:

• competitive and reasonable, enabling the company to attract and retain key talent; • aligned to the company’s strategic and business objectives and the creation of shareholder value; • transparent; and • acceptable to shareholders.

The executive remuneration framework has two components:

• base pay and benefits, including superannuation; and • long-term incentives through the issue of options and performance rights.

Base pay and benefits Base pay is structured as a total employment cost package which may be delivered as a combination of cash and prescribed non-financial benefits at the board’s discretion. Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay for executives is reviewed annually to ensure the executive’s pay is competitive with the market. There are no guaranteed base pay increases included in executives’ contracts. There are no short term cash bonuses included in the figures contained in the Remuneration Report.

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Sunbird Energy Ltd Annual Report 30 June 2014 Directors’ Report 2. REMUNERATION REPORT – AUDITED (continued) (c) Executive remuneration policy and framework (continued)

Superannuation Retirement benefits are limited to superannuation contributions as required under the Australian superannuation guarantee legislation.

Long-term incentives Long-term incentives are provided to directors and executives as incentives to deliver long-term shareholder returns. Some of the issued options and performance rights are granted only if certain performance conditions are met and the directors and executives are still employed by the company at the end of the vesting period. Please refer to the tables on pages 13 and 15 of the Remuneration Report for further details of the performance conditions to be met. Share trading policy The Company has a share trading policy in place and a copy is available on the Company’s website. The Board of Directors ratified and approved the share trading policy previously adopted without change, on 25 October 2013. (d) Link of remuneration to company performance and shareholders’ wealth

The remuneration policy has been tailored to increase goal congruence between shareholders and directors and executives. Currently, this is facilitated through the issue of options and performance rights to directors and executives to encourage the alignment of personal and shareholder interests. There are currently various financial and other targets set for the performance related remuneration, and therefore, remuneration is linked to company performance or shareholder wealth.

(e) Use of remuneration consultants

The company did not use the services of remuneration consultants for designing the remuneration policies for directors or key management personnel. (f) Service agreements

On appointment to the board, all non-executive and executive directors and key management personnel enter into a service agreement with the company. The agreement details the board policies and terms, including compensation, relevant to the office of director. The company currently has service contracts in place with the following four board members. Details of the service agreements are listed below.

Mr Kerwin Rana – Executive Chairman - Commencement date: 12 October 2011 - Base management fee at 30 June 2014 was A$ 214,000 per annum - Base director fee at 30 June 2014 was A$ 36,000 per annum - The agreement is subject to a three months’ notice period

Mr William Barker - Managing Director - Commencement date: 17 May 2011 - Base management fee at 30 June 2014 was A$ 325,000 per annum - Base director fee at 30 June 2014 was A$ 50,000 per annum - Superannuation is payable at statutory rates on the base management and director fees

The agreement is subject to a three months’ notice period

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Sunbird Energy Ltd Annual Report 30 June 2014 Directors’ Report 2. REMUNERATION REPORT – AUDITED (continued) (f) Service agreements (continued)

Mr Andrew Leibovitch - Executive Director - Commencement date: 17 May 2011 - Base management fee at 30 June 2013 was A$ 200,000 per annum - Base director fee at 30 June 2014 was A$ 50,000 per annum - Superannuation is payable at statutory rates on the base management and director fees - The agreement is subject to a three months’ notice period

Mr Marcus Gracey - Non-Executive Director - Commencement date: 17 May 2011 - Base director fee at 30 June 2014 was A$ 50,000 per annum - Superannuation is payable at statutory rates on base director fee - The agreement is not subject to any termination notice period

The company currently has service contracts in place with the following two key management personnel. Details of the service agreements are listed below. Mr Nathan Rayner – Technical Director, - Commencement date: 1 July 2013 - Base management fee at 30 June 2014 was A$ 375,000 per annum - The agreement is subject to a three months’ notice period

Ms Carla Mackay – Chief Financial Officer (Resigned 12 September 2014) - Commencement date: 1 February 2013 - Base fee at 30 June 2014 was R 900,000 (approximately A$ 90,180 per annum) - The agreement is subject to a three months’ notice period

Mr Mark Balfour – General Counsel and Company Secretary (Resigned 11 July 2014) - Commencement date: 1 May 2013 - Base fee at 30 June 2014 was A$ 180,000 per annum - Base company secretary fee at 30 June 2014 was A$ 50,000 per annum - Superannuation is payable at statutory rates on the base company secretary fee - The agreement is subject to a three months’ notice period

The service contract with Mr Mark Balfour was terminated by mutual agreement between the Company and Mr Balfour effective 31st July 2014.

Mr Richard Barker – Company Secretary (Appointed 11 July 2014) - Commencement date: 11 July 2014 - Base company secretary fee at commencement date was A$ 50,000 per annum - Superannuation is payable at statutory rates on the base company secretary fee - The agreement is subject to a three months’ notice period

No other key management personnel have service contracts in place with the consolidated entity.

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Sunbird Energy Ltd Annual Report 30 June 2014 Directors’ Report

2. REMUNERATION REPORT – AUDITED (continued) (g) Details of remuneration

The following tables set out remuneration paid to key management personnel of the company during the reporting period:

Employee benefits Proportion of remuneration

Short-term Post employment Share-based payments Performance linked

Cash salary and fees *

Super annuation Options Performance

rights Total Fixed Options Rights

2014 A$ A$ A$ A$ A$ % % % Non-executive directors Marcus Gracey 50,000 4,625 220 85,630 140,475 36% - 64% Total non-executive directors 50,000 4,625 220 85,630 140,475 36% - 64%

Executive directors Kerwin Rana 250,000 - - 513,778 763,778 33% - 67% William Barker 375,000 34,688 24,632 856,297 1,290,617 29% 2% 69% Andrew Leibovitch 250,000 23,125 30,827 428,149 732,101 34% 4% 62%

Total executive directors 875,000

57,813

55,459

1,798,224

2,786,496 31% 2% 67%

Key management Nathan Rayner (appointed 1 July 2013) 375,000 - - 570,349 945,349 40% - 60%

Carla Mackay (resigned 12 September 2014)

90,180 - 70,489 - 160,669 56% 44% -

Mark Balfour 230,000 4,625 - 93,526 328,151 70% - 30% Total key management 695,180 4,625 70,489 663,875 1,434,169 48% 5% 47% Total (Note 1 below) 1,620,180 67,063 126,168 2,547,729 4,361,140 37% 3% 60%

* No short-term cash bonuses included as paid or accrued for during the year ended 30 June 2014. Note 1 – Total remuneration from cash salary, fees and superannuation is $1,687,243 (refer to note 20 in the Annual Financial Statements).

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Sunbird Energy Ltd Annual Report 30 June 2014 Directors’ Report

2. REMUNERATION REPORT – AUDITED (continued) (g) Details of remuneration (continued)

The following tables set out remuneration paid to key management personnel of the company during the previous reporting period:

Employee benefits Proportion of remuneration

Short-term Post employment Share-based payments Performance linked

Cash salary and fees *

Super annuation Options Performance

rights Total Fixed Options Rights

2013 A$ A$ A$ A$ A$ % % % Non-executive directors Marcus Gracey 43,000 1,125 - 11,849 55,974 79% - 21% Total non-executive directors 43,000 1,125 - 11,849 55,974 77% - 23%

Executive directors

Kerwin Rana 146,980 - - 71,097 218,077 67% - 33%

William Barker 287,500 16,875 17,426 118,495 440,296 69% 4% 27% Andrew Leibovitch 225,000 11,250 17,429 59,247 312,926 75% 6% 19% Total executive directors 659,480 28,125 34,855 248,839 971,299 68% 4% 29% Key management Carla Mackay (appointed 01/02/2013) 40,795

- 22,801 - 63,596 64% 36% -

Mark Balfour (appointed 01/04/2013) 74,375 1,125 - 23,868 99,368 76% - 24%

Total key management 115,170 1,125 22,801 23,868 162,964 71% 14% 15% Total (Note 2 below) 817,650 30,375 57,656 284,556 1,190,237 69% 5% 26%

* No short-term cash bonuses included as paid or accrued for during the year ended 30 June 2013. Note 2 – Total remuneration from cash salary, fees and superannuation is $848,025 (refer to note 20 in the Annual Financial Statements). Since the long-term incentives are provided exclusively by way of performance rights and options, the share based payments disclosed also reflect the value of remuneration consisting of performance rights and options, based on the value of the performance rights and options granted during the year.

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Sunbird Energy Ltd Annual Report 30 June 2014 Directors’ Report 2. REMUNERATION REPORT – AUDITED (continued)

(h) Share-based compensation

(i) Share options The terms and conditions of each grant of options affecting remuneration of key management personnel in the current or future reporting periods are as follows:

Grant date

Date vested and

exercisable Expiry date

Exercise Price

(cents)

Value at grant date - per

option (cents)

Performance milestone to be achieved

Vested %

22-Sep-11 19-Jan-12 19-Jan-15 20 0.11 n/a 100% 22-Sep-11 19-Jan-13 19-Jan-16 20 0.20 n/a 100% 22-Sep-11 19-Jan-14 19-Jan-17 20 0.30 n/a 100%

22-Sep-11 4-Nov-13 19-Jan-15 20 0.11 Cornerstone investor

secured1 100% 22-Sep-11 4-Nov-13 4-Nov-16 25 0.09 Certified resource2 100% 22-Sep-11 4-Nov-13 4-Nov-16 30 0.07 Certified resource3 100% 22-Sep-11 11-Nov-13 11-Nov-16 25 0.09 Certified resource4 100% 22-Sep-11 11-Nov-13 11-Nov-16 30 0.07 Certified resource5 100% 1-Feb-13 1-Feb-14 31-Dec-15 20 7 1 year retention6 100% 1-Feb-13 1-Feb-15 31-Dec-15 20 7 2 year retention7 - 1-Feb-13 31-Dec-15 31-Dec-15 25 5 Gas Sales Agreement8 -

1-Feb-13 31-Dec-15 31-Dec-15 25 8 Final Investment

Decision9 - 1 Vesting was achieved when formal confirmation obtained from & Umbono Capital Partners LLC and Cygnet Capital Pty Ltd that the definition of Cornerstone Investor had been met. 2 Vesting was achieved when an independent expert certified discoveries of at least 500 bcf 3C resource of gas from the Initial Portfolio on 11 November 2013. 3 Vesting was achieved when an independent expert certifies discoveries of at least 1 Tcf 3C resource of gas from the Initial Portfolio on 11 November 2013. 4 Vesting was achieved when an independent expert certifies discoveries of at least 500 bcf 3C resource of gas from a New Venture, confirmed as being the Ibhubesi Gas Project, on 11 November 2013 5 Vesting was achieved when an independent expert certifies discoveries of at least 1 Tcf 3C resource of gas from a New Venture, confirmed as being the Ibhubesi Gas Project, on 11 November 2013 6 Vesting was achieved when the option holder remained employed in the position on 1 February 2014. 7 If option holder employed in the position on 1 February 2015. 8 If Company enters into a Gas Sales Agreement within the region of southern Africa. 9 If Company approves a Financial Investment Decision for the Ibhubesi Gas Project. The exercise price of options was set by the directors after consultation with significant shareholders and was relative to the price at which the company’s shares are traded on the Australian Securities Exchange (ASX) on or about the date of grant. Options granted carry no dividend or voting rights. No terms of equity-settled share-based payment transactions have been altered or modified during the reporting year. When exercisable each option is convertible into one ordinary share.

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(h) Share-based compensation (continued)

(i) Share options (continued) Details of vesting profiles of the options granted as remuneration to each director of the company and each named company executive is set out below. When exercisable, each option is convertible into one ordinary share of Sunbird Energy Ltd.

Name Year of grant

Number of options granted

Value of options at grant date

A$

Number of options vested during the year Vested %

Year in which

options may vest

Max value yet

to vest A$

Marcus Gracey 2012 750,000 1,049 - 100% - - William Barker 2012 2,000,000 4,051 - 100% - -

2012 2,000,000 8,425 2,000,000 100% - - 2012 2,000,000 6,319 - 100% - - 2012 2,500,000 7,808 - 100% - - 2012 5,000,000 13,966 5,000,000 100% - -

2012 5,000,000 12,719 5,000,000 100% - - Andrew Leibovitch 2012 2,000,000 6,319 - 100% - -

2012 2,000,000 4,051 - 100% - - 2012 2,000,000 8,425 2,000,000 100% - - 2012 2,500,000 7,808 - 100% - - 2012 5,000,000 13,966 5,000,000 100% - -

2012 5,000,000 12,719 5,000,000 100% - - Carla Mackay 2013 250,000 23,570 - - 2015 23,570

2013 250,000 23,570 250,000 100% - - 2013 1,000,000 84,787 - - 2015 84,787

No options were exercised during the year ended 30 June 2014.

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(ii) Performance rights The terms and conditions of each grant of performance rights affecting remuneration in the current or future reporting periods are as follows:

Grant date Date vested

and exercisable Expiry date

Exercise Price

(cents)

Value at grant date - per right

(cents) Performance milestone to be

achieved Vested

% 30-Apr-13 1-Nov-13 1-May-15 - 35 Continued service 100% 30-Apr-13 1-May-14 1-May-15 - 35 Continued service 100% 30-Apr-13 1-Nov-14 1-May-15 - 35 Continued service - 30-Apr-13 1-May-15 1-May-15 - 35 Continued service - 30-Apr-13 11-Nov-13 1-May-15 - 35 IGP 2P Reserves1 100% 30-Apr-13 1-May-15* 1-May-15 - 35 IGP 1P Reserves1 100% 30-Apr-13 1-May-15* 1-May-15 - 35 IGP GSA2 - 30-Apr-13 1-May-15* 1-May-15 - 35 IGP FID3 - 30-Apr-13 1-May-15* 1-May-15 - 35 IGP Premium Market4 - 30-Apr-13 1-May-15* 1-May-15 - 35 CBM 3C 500bcf Reserves2 100% 30-Apr-13 1-May-15* 1-May-15 - 35 CBM 3C 1tcf Reserves2 100% 30-Apr-13 1-May-15* 1-May-15 - 35 CBM Pilot - 30-Apr-13 1-May-15* 1-May-15 - 35 CBM GSA2/FID3 -

* Performance rights vest upon achieving a milestone, on or before the expiry date. 1 Obtaining independent expert certification of gas reserves. 2 The company entering into a gas sale agreement (GSA). 3 The company securing finance to support a financial investment decision (FID). 4 The company share price reaching A$1 per share.

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(ii) Performance rights (continued) Details of vesting profiles of the performance rights granted as remuneration to each director of the company and each named company executive is set out below. When exercisable, each right is convertible into one ordinary share of Sunbird Energy Ltd. When vested, each right is convertible into one ordinary share of Sunbird Energy Ltd at no cost to the holder of the right.

Name Year of grant

Number of rights

granted

Value of rights at

grant date A$

Number of rights vested

during the year Vested %

Year in which rights

may vest

Max value yet

to vest A$

Marcus Gracey 2013 100,000 35,500 100,000 100% - -

2013 100,000 35,500 - - 2015 35,500 2013 100,000 35,500 - - 2015 35,500

2013 100,000 35,500 - - 2015 35,500 William Barker 2013 1,000,000 354,999 1,000,000 100% - -

2013 1,000,000 354,999 - - 2015 354,999 2013 1,000,000 354,999 - - 2015 354,999

2013 1,000,000 354,999 - - 2015 354,999 Andrew Leibovitch 2013 500,000 177,500 500,000 100% 2015 177,500

2013 500,000 177,500 - - 2015 177,500 2013 500,000 177,500 - - 2015 177,500

2013 500,000 177,500 - - - - Kerwin Rana 2013 500,000 177,500 500,000 100% - -

2013 500,000 177,500 - - 2015 177,500 2013 500,000 177,500 - - 2015 177,500 2013 500,000 177,500 - - 2015 177,500 2014 100,000 35,499 100,000 100% - - 2014 100,000 212,999 - - 2015 212,999 2014 100,000 212,999 - - 2015 212,999

2014 100,000 212,999 - - 2015 212,999 Nathan Rayner 2013 375,000 131,250 375,000 100% 2014 - 2013 375,000 131,250 - - 2015 131,250 2013 375,000 131,250 - - 2015 131,250 2013 375,000 131,250 - - 2015 131,250 2013 100,000 35,000 100,000 100% 2014 - 2013 100,000 35,000 - - 2015 35,000 2013 250,000 87,500 250,000 100% 2014 - 2013 250,000 87,500 250,000 100% 2014 - 2013 250,000 87,500 - - 2015 87,500 2013 250,000 87,500 - - 2015 87,500 2013 200,000 70,000 - - 2014 70,000 Mark Balfour 2013 100,000 35,000 100,000 100% - -

2013 100,000 35,000 100,000 100% - - 2013 100,000 35,000 - - 2015 35,000

2013 100,000 35,000 - - 2015 35,000

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(ii) Performance rights (continued) Details of ordinary shares in the company issued to key management personnel of the group as a result of the exercise of performance rights are set out below.

Name

Date of exercise of

options

Number of ordinary shares issued on exercise of

options during the year Value at exercise

date*

Price per share on exercise date (cents)

Directors Marcus Gracey 11-Nov-13 100,000 47,000 47 William Barker 11-Nov-13 1,000,000 470,000 47 Andrew Leibovitch 11-Nov-13 500,000 235,000 47 Kerwin Rana 11-Nov-13 600,000 282,000 47 Other key management personnel Nathan Rayner 11-Nov-13 600,000 282,000 47 Mark Balfour 11-Nov-13 200,000 94,000 47

* The value at the exercise date of performance rights that were granted as part of remuneration and were exercised during the year has been determined as the intrinsic value of the rights at that date.

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(i) Equity instruments held by key management personnel

(i) Options and performance rights holdings

The following table shows share options and performance rights held by key management personnel during the financial year.

2014 Name

Balance at start of the

period Granted as

compensation Exercised

Balance at the end of the year

Vested during

the year Vested and exercisable Unvested

Marcus Gracey Options 750,000 - - 750,000 - 750,000 - Performance rights 400,000 - (100,000) 300,000 100,000 - 300,000 William Barker Options 18,500,000 - - 18,500,000 - 18,500,000 - Performance rights 4,000,000 - (1,000,000) 3,000,000 1,000,000 - 3,000,000 Andrew Leibovitch Options 18,500,000 - - 18,500,000 - 18,500,000 - Performance rights 2,000,000 - (500,000) 1,500,000 500,000 - 1,500,000 Kerwin Rana Options - - - - - - - Performance rights 2,000,000 400,000 (600,000) 1,800,000 600,000 - 1,800,000 Nathan Rayner Options - - - - - - - Performance rights 2,700,000 - (600,000) 2,100,000 975,000 375,000 1,725,000 Mark Balfour Options - - - - - - - Performance rights 400,000 - (200,000) 200,000 200,000 - 200,000 Carla Mackay Options 1,500,000 - - 1,500,000 250,000 250,000 1,250,000 Performance rights - - - - - - -

(ii) Share holdings

The following table shows ordinary shares held by key management personnel during the financial year.

Balance at start of the

year

Received on exercise of

options during the

year

Received on vesting of

rights during the year

Other changes during the year

Balance at the end of the

year Marcus Gracey 50,000 - 100,000 20,000 170,000 William Barker 2,050,000 - 1,000,000 - 3,050,000 Andrew Leibovitch 2,300,000 - 500,000 - 2,800,000 Kerwin Rana - - 600,000 - 600,000 Nathan Rayner 200,000 - 600,000 - 800,000 Mark Balfour 140,530 - 200,000 (4,500) 336,030 Carla Mackay - - - -

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(j) Loans to key management personnel

There were no loans to key management personnel made during the year ended, or outstanding as at 30 June 2014.

(k) Other transactions with key management personnel

A related party entity to Andrew Leibovitch, namely Serval Enterprises, was paid A$1,145 (2013: A$nil). A director, Kerwin rana, is a director of Umbono Capital Partners (Proprietary) Limited (“Umbono”), who are the operators of the group’s South African projects. During the reporting period a total of A$600,000 (2013: A$600,000) was due to Umbono for their services, of which $200,000 remains unpaid (2013: A$nil). During the reporting period, the company incurred and fully paid A$21,109 (2013: A$37,500) for general counsel legal services to MB Law Services Pty Ltd, the entity related to Mark Balfour. All transactions were made on normal commercial terms and conditions and at market rates. There were no other transactions with related parties during the reporting period. The following directors and executive fees for the financial year were payable to entities related to key management personnel:

2014 2013 Related entity Key management person A$ A$ Stratosphere Consulting Group Marcus Gracey - 31,750 Ballymoyer Pty Ltd William Barker 387,292 288,675 Crest Corporation Pty Ltd Andrew Leibovitch 241,689 199,458 Khanyile Consulting Limited Kerwin Rana 124,833 -

As at 30 June 2014, the following amounts remain unpaid in respect to those transactions:

Stratosphere Consulting Group Marcus Gracey - - Ballymoyer Pty Ltd William Barker 178,750 - Crest Corporation Pty Ltd Andrew Leibovitch 111,479 - Khanyile Consulting Limited Kerwin Rana 71,333 -

End of Audited Remuneration Report.

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Sunbird Energy Ltd Annual Report 30 June 2014 Directors’ Report 3. PRINCIPAL ACTIVITIES The Consolidated The principal activities of the consolidated entity carried out during the course of the financial year consisted of the fulfillment and satisfaction of conditions subsequent under the acquisition agreement for the 76% participating interest in the existing offshore gas reserve known as the Ibhubesi Gas Project, in southern Africa, and the development thereof, and the continued evaluation and exploration of coal bed methane (CBM) and other unconventional gas. The Ibhubesi Gas Project transaction, which has been closed from a contractual perspective, was granted the approval for the transfer of title from the South African Department of Mineral Resources, thereby giving Sunbird the right to operate and develop the Ibhubesi Gas Project, South Africa’s largest undeveloped gas field. The Ibhubesi Gas Project has multiple development opportunities including gas-fired power projects to supply the high value South African energy market. Sunbird’s joint venture partner in the project is PetroSA (24%), the national oil company of South Africa. Sunbird is conducting a phased exploration program that will define the resource base and demonstrate the commercial potential of its portfolio of CBM assets, which contain a Best Estimate Gas-in-Place of 5.3 Tcf (trillion cubic feet). 4. RESULTS AND DIVIDENDS

The consolidated entity’s loss after tax attributable to members of the consolidated entity for the financial year ending 30 June 2014 was A$10,984,239 (2013: A$4,957,434). No dividends have been paid or declared by the company during the year ended 30 June 2014 (2013: nil). 5. LOSS PER SHARE

The basic loss per share for the consolidated entity for the year was 9.6 cents per share (2013: 4.8 cents per share). 6. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Ibhubesi Gas Project Acquisition On December 20, 2012, Sunbird Energy (Ibhubesi) Pty Ltd (“Sunbird Ibhubesi”), a fully owned Australian subsidiary of Sunbird Energy Ltd, signed a purchase and sale agreement and Sales Enhancement Agreement ( collectively the “Ibhubesi Agreement”) with Forest Oil Corporation (“Forest”), The Anschutz Overseas Corporation (“Anschutz Overseas” and Forest Oil Netherlands B.V. (“Forest Netherlands”), (collectively referred to as the “Sellers”), for acquisition of their collective 76% interest in the Ibhubesi Gas Field, Production Right 12/1/4/03, located in offshore petroleum Block 2A (“the Block”) off the West Coast of South Africa. The transaction was successfully completed on 17th June 2014, which now crystallises and affirms Sunbird take a controlling interest in the Block. Transactions with the Sellers (“Ibhubesi Transactions”) comprised the acquisition of the following subsidiaries:

• Forest Exploration International (SA) (Proprietary) Limited (“Forest SA”), the operator of the Ibhubesi Gas Field based in South Africa, holding 53.2% working interest in the Block 2A Production Right;

• Anschutz South Africa Corporation (“Anschutz”), based in the United States, holding 22.8% working interest in the Block via its South African subsidiary Anschutz Overseas (SA) Pty) Ltd; and

• Green River Electric Power Company Proprietary Limited (“GREPCo”), based in South Africa.

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Sunbird Energy Ltd Annual Report 30 June 2014 Directors’ Report 6. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS (CONTINUED) The remaining 24% interest in the Block is held by the national oil company, PetroSA. The acquisition of Forest SA was subject to, amongst other things, Ministerial approval under Section 11 of the Mineral and Petroleum Resources Development Act, 2002 (“Section 11 Approval”). Such approval was granted by the Minister for Minerals and Energy on 7th October 2013. The acquisition of the various subsidiaries of the Sellers, included the acquisition by Sunbird of various inter-company loans made variously by the Sellers to their respective South African subsidiaries and was also subject to the Sellers procuring approvals from the South African Treasury (“Exchange Control Approvals”) of such inter-company loans as foreign entity loans capable of being claimed by the foreign lenders and the repayment monies being repatriated out of South Africa at the time of repayment. Although Sunbird had a right to waive the requirement for the Sellers to procure such Exchange Control Approvals on or before the date of closing of the Ibhubesi Transactions, such Exchange Control Approvals were procured and ultimately evidence of such approvals were given by the Sellers to Sunbird on or about 13 June 2014. Upon payment of the consideration for the Ibhubesi Transactions which comprised an initial payment to the Sellers of US$1.471 million (“Initial Payments”) on signing of the Ibhubesi Agreement, Sunbird Ibhubesi acquired control and the interests of GREPCo and Anschutz, whilst the control of Forest SA was eventually acquired only upon the Sellers receiving both the Section 11 Approval and the Exchange Control Approvals. In addition to the Initial Payments made to Forest, Anschutz Overseas and Forest Netherlands of US$1.471 million, a further US$1.029 million (“Forest Payment”) was paid to Forest upon closure of the Ibhubesi Transactions on 17th June 2014. At the time of such closure and remittance of the Forest Payment, Sunbird Ibhubesi held a collective 76% interest in the Block. The Initial Payments were in consideration of the purchase of the entire shareholdings in the Forest SA, Anschutz and GREPCo, as well as shareholder loans from their parent companies, which carry with them considerable assessed losses in terms of the South African Income Tax Act, 1962. Under the Ibhubesi Agreement and, in addition to the Initial Payments and the Forest Payment, conditional on Sunbird Ibhubesi achieving certain project milestones and commercial development success, the following enhancement payments are also payable to Forest, Anschutz Overseas and Forest Netherlands, subject to stated conditions:

• A total of US$5 million (A$5.47 million) payable on execution of a Gas Sales Agreement • A total of US$10 million (A$10.94 million) on Final Investment Decision or First Gas Sales

Further under the Ibhubesi Agreement, the following enhancement payment is also payable to Forest and Anschutz Overseas from Block produced gas sales achieved during the term of the Production Right for the Block and any extension thereof:

• A total of Sales Enhancement Fee equal to 0.76% of net gas sales revenues These liabilities have not been brought to account in these financial statements as the contractual cash flow only arises upon the occurrence of the above milestones. Should the milestones not occur, no further amounts are payable by Sunbird to the Sellers under the Ibhubesi Agreement. On 26 August 2013, the United States Trade and Development Agency signed an agreement with Sunbird in which it granted funding to the Ibhubesi Gas Project to finalise the field development plan, being 80% or approximately A$800,000 (US$700,000) of the cost. Approval of Performance Rights and Option Issues By a unanimous resolution of the members of the company made at an extraordinary general meeting of the members held on 26th July 2013, the issue of share options or share rights in the company to a corporate advisor and key management personnel as a long term incentive to deliver long-term shareholder returns were approved. By an agreement negotiated between Sunbird and Argonaut, of the five million options issued with shareholder approval to Argonaut, four million options were surrendered and extinguished by Argonaut.

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Sunbird Energy Ltd Annual Report 30 June 2014 Directors’ Report 7. EVENTS SUBSEQUENT TO REPORTING DATE Matters or circumstances have arisen since the end of the financial year which have significantly affected or may significantly affect the operations, results or state of affairs of the group in future financial years which have not been disclosed publicly at the date of this report are: Umbono Loan Facility On 10 August 2014, the consolidated entity arranged the Umbono Loan Facility of A$2,500,000 with Umbono Capital Partners LLC and Umbono Finacial Services (Pty) LTD (collectively referred to as “Umbono”). The loan agreement provides for the drawdown in tranches as the working capital requirements of the Company demand the use of such funds, and the aggregate loan drawn down in tranche payments is repayable within twelve (12) months of the first drawdown of funds. Interest on the amount of facility used is 20% per annum, calculated daily and payable monthly. Subject to shareholder approval, at the election of Umbono, the outstanding amount of the Facility may be converted from debt to equity in the Company and, thereby, potentially avoid the necessity for the Company to repay the whole or part of the Facility converted to equity, by alternate capital raisings or debt funding. Change of Company Secretary Mark Balfour resigned his office as Company Secretary for the Company with effect form 11 July 2014. The service agreement between the Company, MBLaw Services Pty Ltd (an entity controlled by Mr Balfour) and Mr Balfour was terminated by mutual agreement between the parties with effect from 31st July 2014. Richard Barker was appointed Company Secretary for the Company with effect from 11th July 2014 to succeed Mr Balfour following his resignation from that office. Vandasia share subscription On 9 September 2014, a transaction was concluded with Vandasia Investments Limited (“Vandasia”), for Vandasia to acquire a 43.9% interest in Sunbird via a two stage transaction involving two capital raisings at the equivalent weighted average price of approximately AUD$0.34 per share and the acquisition and conversion of 47.75m existing AUD$0.20 options. Overall, the transaction is priced at a premium of 79% to Sunbird's last traded share price. The first stage of the investment, being the issue of 20,367,127 fully paid shares for an aggregate subscription amount of USD$5,000,000 (A$5,353,500), is due for completion within 10 business days and represents a premium of 39.5% to the Company’s last traded share price. The second stage of the investment (which is subject to shareholder approval and execution of a Gas Sales Term Sheet with a potential customer) includes the issue of an additional 23,021,757 shares to Vandasia for an aggregate subscription amount of approximately USD$9,350,000 (A$10,011,045), and the purchase and conversion 47.75m options, which will result in the Company receiving approximately an additional US$8,850,000 (A$9,475,695 - subject to exchange rates). Stage 1

The Company will issue Vandasia 20,367,127 fully paid shares for an aggregate subscription amount of USD$5,000,000 (A$5,353,500) (Tranche 1 Shares) pursuant to the terms of a share subscription agreement (Share Subscription Agreement). This equates to a price per share of approximately AUD$0.265 based on current exchange rates, being a premium of 39.5% to the last traded share price on 8 September 2014. The Tranche 1 Shares will be issued pursuant to the Company's current capacity under Listing Rule 7.1 and Listing Rule 7.1A. Following issue of the Tranche 1 Shares, Vandasia will hold 14.9% of the Company's issued capital and will be entitled to nominate one director. Vandasia intends to nominate Mr. Niyi Oyedele to serve as its representative on the Sunbird board of directors. Stage 2

Subject to meeting conditions precedents by no later than 30 November 2014, including execution of a Gas Sales Term Sheet with a potential customer and shareholder approval under item 7 of section 611 of the Corporations Act, the Company will issue 23,021,757 shares to Vandasia (Tranche 2 Shares) for an aggregate subscription amount of approximately USD$9,350,000 (A$10,011,045) pursuant to the terms of the Share Subscription Agreement.

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Sunbird Energy Ltd Annual Report 30 June 2014 Directors’ Report 7. EVENTS SUBSEQUENT TO REPORTING DATE (CONTINUED) Simultaneously with the issue of the Tranche 2 Shares, Vandasia will purchase and exercise 47,750,000 existing AUD$0.20 options pursuant to the terms of an option sale agreement (Option Sale Agreement). The conversion of options will provide Sunbird with AUD$8,550,000 (A$9,475,695) in additional capital (subject to exchange rates) and will see Vandasia issued with a further 47,750,000 shares (Option Shares). The conversion of the options will be the subject of a separate shareholder resolution pursuant to item 7 of section 611 of the Corporations Act. Besides the above, no matters or circumstances have arisen since the end of the financial year which have significantly affected or may significantly affect the operations, results or state of affairs of the group in future financial years which have not been disclosed publicly at the date of this report. 8. LIKELY DEVELOPMENTS AND EXPECTED RESULTS The company will continue to pursue activities within its corporate objectives. Further information about likely developments in the operations of the company and the expected results of those operations in the future financial years has not been included in this report because disclosure would likely result in unreasonable prejudice to the company. 9. ENVIRONMENTAL REGULATIONS The consolidated entity’s operations are subject to environmental regulations under the legislation of African countries in which it operates. The board believes there are adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply. The company is not subject to the reporting requirements of either the Energy Efficiency Opportunities Act 2006 or the National Greenhouse and Energy Reporting Act 2007.

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Sunbird Energy Ltd Annual Report 30 June 2014 Directors’ Report 10. DIRECTORS’ AND EXECUTIVES’ INTERESTS As at the date of this report, the interests of the directors and executives in the shares, options and performance rights of the company were:

Performance Option strike price Shares rights $0.20 $0.25 $0.30 Non-executive directors Marcus Gracey 170,000 300,000 750,000 - - Executive directors William Barker 3,050,000 3,000,000 8,500,000 5,000,000 5,000,000 Andrew Leibovitch 2,800,000

1,500,000 8,500,000 5,000,000 5,000,000

Kerwin Rana 600,000 1,800,000 - - - Key management Nathan Rayner 800,000 2,100,000 - - - Mark Balfour 336,030 200,000 - - - Carla Mackay - - 500,000 500,000 500,000 Total 7,756,030 8,900,000 18,250,000 10,500,000 10,500,000

11. SHARES UNDER OPTION

As at the date of this report, there were 100,500,000 unlisted options over ordinary shares on issue detailed as follows:

Options Code No. of

Strike Price Expiry Date SNYOCI 5,000,000 $0.20 19-Jan-15 SNYOPT1 53,000,000 $0.20 19-Jan-15 SNY03 4,000,000 $0.20 19-Jan-15 SNY04 4,000,000 $0.20 19-Jan-16 SNY05 4,000,000 $0.20 19-Jan-17 SNYOIP1 5,000,000 $0.25 11-Nov-2016 SNYOIP2 5,000,000 $0.30 11-Nov-2016 SNYONV1 5,000,000 $0.25 11-Nov-2016 SNYONV2 5,000,000 $0.30 11-Nov-2016 SNYOR3 500,000 $0.20 31-Dec-15 SNYOR4 1,000,000 $0.25 31-Dec-15 SNYOP6 3,500,000 $0.25 31-Dec-15 SNYOP7 1,500,000 $0.30 31-Dec-15 SNYO6 1,000,000 $0.50 21-May-16 SNYOR5 3,000,000 $0.50 01-Oct-16 Total 100,500,000

Option holders do not have any right, by virtue of the option, to participate in any share issue of the company. Included in these options are options granted as remuneration to the directors and key management personnel, as disclosed in the remuneration report.

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Sunbird Energy Ltd Annual Report 30 June 2014 Directors’ Report 11. SHARES UNDER OPTION (CONTINUED) As at the date of this report, there were 8,950,000 unlisted performance rights to ordinary shares on issue detailed as follows:

Performance Rights Code No. of rights Strike Price Expiry Date

SNYPR4 100,000 $0.00 01-May-15 SNYPR5 8,850,000 $0.00 01-May-15 Total 8,950,000

Rights holders do not have any right, by virtue of the performance right, to participate in any share issue of the company until the performance milestone has been achieved and the right vested absolutely. The majority of these rights are rights granted as remuneration to the directors and key management personnel, as disclosed in the remuneration report.

12. INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS

Indemnification An indemnity agreement has been entered into with each of the directors, chief financial officer and company secretary of the company named earlier in this report. Under the agreement, the company has agreed to indemnify those officers against any claim or for any expenses or costs which may arise as a result of work performed in their respective capacities to the extent permitted by law. There is no monetary limit to the extent of this indemnity.

Insurance During the financial year the company has taken out an insurance policy in respect of directors’ and officers’ liability and legal expenses for directors and officers. 13. CORPORATE STRUCTURE Sunbird Energy Ltd is a company limited by shares that is incorporated and domiciled in Australia. The company is listed on the Australian Securities Exchange under the code “SNY”.

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Sunbird Energy Ltd Annual Report 30 June 2014 Directors’ Report 14. AUDIT AND NON-AUDIT SERVICES The company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and the experience with the company and/or the group are important. Details of the amounts paid or payable to the auditor, BDO Audit (WA) Pty Ltd (“BDO”), are set out below. The board of directors has considered the position and is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: - all non-audit services have been reviewed by the board to ensure they do not impact the impartiality and objectivity of

the auditor - none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of

Ethics for Professional Accountants. During the reporting period, the following fees were paid or payable for audit and non-audit services provided by the auditor of the parent entity, its related practices and non-related audit firms:

30-Jun-14 A$

30-Jun-13 A$

Services provided by the Auditor – BDO Audit (WA) Pty Ltd Audit and review of financial statements 64,473 43,740 Tax compliance services 14,017 14,907 Total services provided by the Auditor 78,490 58,647 Services provided by network firms of BDO Audit (WA) Pty Ltd Audit and review of financial statements 22,174 11,080 Due diligence audit - 9,393 Total services provided by BDO Audit (WA) Pty Ltd and network firms 100,664 79,120

15. AUDITOR’S INDEPENDENCE DECLARATION The lead auditor’s Independence Declaration is set out on page 27 and forms part of the directors’ report for the financial year ended 30 June 2014. This report is signed in accordance with a resolution of the board of directors and is signed on behalf of the directors by:

William Barker Managing Director Perth, 25 September 2014

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Directors’ Declaration

SUNBIRD ENERGY LTD AND ITS CONTROLLED ENTITIES In the directors’ opinion:

(a) the financial statements and notes set out on pages 30 to 71 are in accordance with the Corporations Act 2001,

including:

i. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional requirements, and

ii. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its performance for the financial year ended on that date; and

(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable, and

(c) The consolidated entity has included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards.

Note a(i) confirms that the financial statements also comply with International Financial Reporting

Standards as issued by the International Accounting Standards Board.

The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the board of directors and is signed on behalf of the directors by:

William Barker Managing Director Perth 25 September 2014

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38 Station StreetSubiaco, WA 6008PO Box 700 West Perth WA 6872Australia

Tel: +61 8 6382 4600Fax: +61 8 6382 4601www.bdo.com.au

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UKcompany limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved underProfessional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

INDEPENDENT AUDITOR’S REPORT

To the members of Sunbird Energy Ltd

Report on the Financial Report

We have audited the accompanying financial report of Sunbird Energy Ltd, which comprises theconsolidated statement of financial position as at 30 June 2014, the consolidated statement of profit orloss and other comprehensive income, the consolidated statement of changes in equity and theconsolidated statement of cash flows for the year then ended, notes comprising a summary ofsignificant accounting policies and other explanatory information, and the directors’ declaration of theconsolidated entity comprising the company and the entities it controlled at the year’s end or fromtime to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives atrue and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001and for such internal control as the directors determine is necessary to enable the preparation of thefinancial report that gives a true and fair view and is free from material misstatement, whether due tofraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101Presentation of Financial Statements, that the financial statements comply with InternationalFinancial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted ouraudit in accordance with Australian Auditing Standards. Those standards require that we comply withrelevant ethical requirements relating to audit engagements and plan and perform the audit to obtainreasonable assurance about whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial report. The procedures selected depend on the auditor’s judgement, including theassessment of the risks of material misstatement of the financial report, whether due to fraud or error.In making those risk assessments, the auditor considers internal control relevant to the company’spreparation of the financial report that gives a true and fair view in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the company’s internal control. An audit also includes evaluating the appropriatenessof accounting policies used and the reasonableness of accounting estimates made by the directors, aswell as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion.F

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27

Independence

In conducting our audit, we have complied with the independence requirements of the CorporationsAct 2001. We confirm that the independence declaration required by the Corporations Act 2001, whichhas been given to the directors of Sunbird Energy Ltd, would be in the same terms if given to thedirectors as at the time of this auditor’s report.

Opinion

In our opinion:

(a) the financial report of Sunbird Energy Ltd is in accordance with the Corporations Act 2001,including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014and of its performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and

(b) the financial report also complies with International Financial Reporting Standards as disclosed inNote 1.

Report on the Remuneration Report

We have audited the Remuneration Report included in the directors’ report for the year ended 30 June2014. The directors of the company are responsible for the preparation and presentation of theRemuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibilityis to express an opinion on the Remuneration Report, based on our audit conducted in accordance withAustralian Auditing Standards.

Opinion

In our opinion, the Remuneration Report of Sunbird Energy Ltd for the year ended 30 June 2014complies with section 300A of the Corporations Act 2001.

BDO Audit (WA) Pty Ltd

Brad McVeighDirector

Perth, 25 September 2014For

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38 Station StreetSubiaco, WA 6008PO Box 700 West Perth WA 6872Australia

Tel: +61 8 6382 4600Fax: +61 8 6382 4601www.bdo.com.au

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UKcompany limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved underProfessional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

DECLARATION OF INDEPENDENCE BY BRAD MCVEIGH TO THE DIRECTORS OF SUNBIRD ENERGY LTD

As lead auditor of Sunbird Energy Ltd for the year ended 30 June 2014, I declare that, to the best of myknowledge and belief, there have been:

1. No contraventions of the auditor independence requirements of the Corporations Act 2001 inrelation to the audit; and

2. No contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Sunbird Energy Ltd and the entities it controlled during the period.

Brad McVeighDirector

BDO Audit (WA) Pty Ltd

Perth, 25 September 2014

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29


Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2014

2014 2013

Note A$ A$

Interest revenue 34,563 170,877 Exploration expenses (5,213,925) (3,583,190) Corporate cost 5 (450,184) (982,216) Professional fees 6 (515,741) (276,043) Directors' and executives' fees (236,002) (290,444) Share-based payment expense 21 (4,092,600) (566,370) Impairment of E&E 12 (752,749) - Finance costs (92,503) (874) Loss before income tax (11,319,141) (5,528,261) Income tax expense 7 - - Loss from continuing operations after income tax (11,319,141) (5,528,261) Other comprehensive income: Items that may be reclassified subsequently to profit or loss: Foreign currency translation 16 (50,674) 92,075 Total other comprehensive loss for the year (11,369,815) (5,436,186) Loss for the period attributable to: Members of the parent entity (10,984,239) (4,957,434) Non-controlling interest 17 (334,902) (570,827) Total loss from continuing operations (11,319,141) (5,528,261) Total comprehensive loss for the period attributable to: Members of the parent entity (11,034,913) (4,865,359) Non-controlling interest 17 (334,902) (570,827) Loss for the year attributable to owners of the parent (11,369,815) (5,436,186) Loss per share from continuing operation attributable to the ordinary equity holders of the Company Basic and diluted loss per share (cents) 8 (9.60) (4.80) The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes.

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Consolidated Statement of Financial Position as at 30 June 2014

2014 2013 Note A$ A$

Assets Current assets Cash and cash equivalents 9 373,043 3,714,244 Trade and other receivables 10 867,839 290,763 Total current assets 1,240,882 4,005,007 Non-current assets Property, plant and equipment 11 56,577 86,488 Exploration and evaluation expenditure 12 3,754,489 2,667,019 Deposit for acquisition of subsidiary 12 - 1,637,737 Total non-current assets 3,811,066 4,391,244 Total assets 5,051,948 8,396,251 Liabilities Current liabilities Trade and other payables 13 1,787,337 406,850 Borrowings 14 2,484,763 - Finance lease obligation 5,234 5,406 Total current liabilities 4,277,334 412,256 Non-current liabilities Finance lease obligation 17,138 24,304 Total non-current liabilities 17,138 24,304

Total liabilities 4,294,472 436,560

Net assets 757,476 7,959,691 Equity Share capital 15 14,338,035 14,263,035 Reserves 16 4,768,949 727,023 Accumulated loss (17,585,323) (6,601,084) Total equity attributable to owners of Sunbird Energy Ltd 1,521,661 8,388,974 Non-controlling interest 17 (764,185) (429,283) Total equity 757,476 7,959,691

The consolidated statement of financial position is to be read in conjunction with the accompanying notes.

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Consolidated Statement of Changes in Equity for the year ended 30 June 2014

Share capital

Foreign currency translation

reserve Share-based

payment reserve Total reserves Accumulated loss

Total attributable to equity holders

of the group/ company

Non-controlling interest share of foreign exchange Total equity

A$ A$ A$ A$ A$ A$ A$ A$ Balance at 1 July 2012 9,583,787 (8,255) 76,833 68,578 (1,643,650) 8,008,715 141,544 8,150,259

Loss for the year - - - - (4,957,434) (4,957,434) (570,827) (5,528,261) Foreign currency translation - 92,075 - 92,075 - 92,075 - 92,075 Total comprehensive loss for the year - 92,075 - 92,075 (4,957,434) (4,865,359) (570,827) (5,436,186) Issue of shares – net of transaction costs 4,679,248 - - - - 4,679,248 - 4,679,248 Share-based payments - - 566,370 566,370 - 566,370 - 566,370 Total contributions by and distributions to owners of Company recognised directly in equity 4,679,248 -

566,370

566,370

-

5,245,618

-

5,245,618 Balance at 30 June 2013 14,263,035 83,820 643,203 727,023 (6,601,084) 8,388,974 (429,283) 7,959,691 Loss for the year - - - - (10,984,239) (10,984,239) (334,902) (11,319,141) Foreign currency translation - (50,674) - (50,674) - (50,674) - (50,674) Total comprehensive loss for the year - (50,674) - (50,674) (10,984,239) (11,034,913) (334,902) (11,369,815) Issue of shares – net of transaction costs 75,000 - - - - 75,000 - 75,000 Share-based payments - - 4,092,600 4,092,600 - 4,092,600 - 4,092,600 Non-controlling interest - - - - - - - - Total distributions to owners of Company recognised directly in equity 75,000 - 4,092,600 4,092,600 - 4,167,600 - 4,167,600 Balance at 30 June 2014 14,338,035 33,146 4,735,803 4,768,949 (17,585,323) 1,521,661 (764,185) 757,476 Note(s) 15 16 16

The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes.

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Consolidated Statements of Cash Flows for the year ended 30 June 2014

2014 2013

Note A$ A$

Cash flows from operating activities Interest received 34,563 275,529 Payment to suppliers and employees (1,071,217) (1,816,438) Exploration payments (4,505,219) (3,292,574) Reimbursement by PetroSA for IGP expenses 242,563 - Net cash from operating activities 18 (5,299,310) (4,833,483) Cash flows from investing activities Cash payment for property, plant and equipment (5,245) (71,891) Payment of exploration and evaluation expenditure (335,887) (1,923,867) Payment of deposit for acquisition of subsidiary 12 - (1,637,737) Revaluation of foreign subsidiary - 8,539 Net cash from investing activities (341,132) (3,624,956)

Cash flows from financing activities Proceeds from issue of shares/exercise of options 75,000 5,001,000 Share issue costs - (321,752) Proceeds from borrowings net of raising costs 14 2,575,624 - Repayment of borrowings - capital (329,813) - Interest paid (5,428) - Finance lease payments (7,337) 29,709 Net cash from financing activities 2,308,046 4,708,957

Total cash movement for the year (3,332,396) (3,749,482) Cash at the beginning of the year 3,714,244 7,466,298 Exchange rate adjustment (8,805) (2,572) Total cash at the end of the year 9 373,043 3,714,244

h fl f The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.

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Sunbird Energy Ltd Annual Report 30 June 2014 Notes to the Consolidated Financial Statements

Notes to the Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. The financial statements are for the consolidated entity consisting of Sunbird Energy Ltd and its subsidiaries.

A Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. Sunbird Energy Ltd is a for-profit entity for the purpose of preparing the financial statements. (i) Compliance with IFRS The consolidated financial statements of the Sunbird Energy Ltd group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB). Where necessary, comparatives have been reclassified and repositioned for consistency with the current year disclosures.

(ii) New and amended standards adopted by the group The group has applied the following standards and amendments for first time for their annual reporting period commencing 1 July 2013:

- AASB 10 Consolidated Financial Statements - there is no impact on transactions and balances recognised in the financial statements as the consolidated entity does not have any special purpose entities.

- AASB 11 Joint Arrangements - there is no impact on transactions and balances recognised in the financial statements as the consolidated entity has not entered into any joint arrangements.

- AASB 12 Disclosure of Interests in Other Entities – there is no impact on amounts recognised in the financial statements, the standard only affected the disclosures in the notes to the financial statements.

- AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 - there is no impact on amounts recognised in the financial statements, the standard only affected the disclosures in the notes to the financial statements.

- AASB 119 Employee Benefits (September 2011) and AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) – there is no impact on the transactions and balances recognised in the financial statements as the consolidated entity does not have an unconditional right to defer settlement.

- AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle, and

- AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities

There has been no change in the accounting policies arising from the adoption of new and amended standards and there were no adjustments to the amounts recognised in the financial statements. The standards only affected the disclosures in the notes to the financial statements. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. (iii) Early adoption of standards The consolidated entity has not elected to apply any pronouncements before their operative date in the annual reporting period beginning 1 July 2013.

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A Basis of preparation (continued)

(iv) Critical accounting estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. (v) Going concern The financial statements have been prepared on a going concern basis. As at 30 June 2014 the consolidated entity had net assets of A$757,476. At the date of this report the consolidated entity also has $A2,350,000 available under the White Swan Loan Facility and A$1,800,000 available under the Umbono Loan Facility. The White Swan Loan Facility The White Swan Loan Facility agreement provides for the drawdown of the loan by tranches of A$1 million and is repayable within 12 months of the first drawdown of funds. On 5 March 2014, Sunbird successfully obtained a grant of waiver from Listing Rule 10.1 from ASX to provide security over Sunbird's assets through the Facility with White Swan. This waiver was required as White Swan is a related party within the definitions of the Corporations Act and the Listing Rules. Subject to shareholder approval, at the election of White Swan the outstanding amount of the Facility may be converted from debt to equity in the Company and, thereby, potentially avoid the necessity for the Company to repay the whole or part of the Facility converted to equity, by alternate capital raisings or debt funding. The Umbono Loan Facility On 10 August 2014, the consolidated entity arranged the Umbono Loan Facility of A$2,500,000 with Umbono Capital Partners LLC and Umbono Finacial Services (Pty) LTD (collectively referred to as “Umbono”). The loan agreement provides for the drawdown in tranches as the working capital requirements of the Company demand the use of such funds, and the aggregate loan drawn down in tranche payments is repayable within twelve (12) months of the first drawdown of funds. Interest on the amount of facility used is 20% per annum, calculated daily and payable monthly. Total amount drawn down to date is $700,000. Subject to shareholder approval, at the election of Umbono, the outstanding amount of the Facility may be converted from debt to equity in the Company and, thereby, potentially avoid the necessity for the Company to repay the whole or part of the Facility converted to equity, by alternate capital raisings or debt funding. Vandasia share subscription In addition, on 9 September 2014 the company entered into a share subscription agreement with Vandasia Investments Limited (“Vandasia”). The first stage of the agreement, being the issue of 20,367,127 fully paid shares for an aggregate subscription amount of USD$5,000,000 (A$5,353,500), is due for completion within 10 business days from the agreement date. Details of the Vandasia transaction are disclosed in note 22.

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

B Principles of consolidation

Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Sunbird Energy Ltd (“the company” or “the parent entity”) as at 30 June 2014 and the results of all subsidiaries for the year then ended. Sunbird Energy Ltd and its subsidiaries together are referred to in this financial report as the group or the consolidated entity.

Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity.

The acquisition method of accounting is used to account for business combinations by the group. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent.

Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by the consolidated entity are attributed to the non-controlling interest in full, even if that results in a deficit balance.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the statement of comprehensive income, statement of financial position and statement of changes in equity. C Segment reporting

AASB 8 Operating Segments requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. The segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker.

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D Foreign currency translation

(i) Functional and presentation currency Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The functional currency of Sunbird is Australian dollars (“A$”). The consolidated financial statements are presented in Australian dollars, which is the company’s presentation currency.

(ii) Transactions and balances Transactions in foreign currencies are translated to the functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to A$ at foreign exchange rates ruling at the dates the fair value was determined.

(iii) Financial statements of foreign operations The revenues and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to Australian dollars at rates approximating to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on translation are recognised directly in the foreign currency translation reserve (“FCTR”), as a separate component of equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to profit or loss, as part of the gain or loss on sale where applicable.

E Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. Net financial income Net financial income comprises interest payable on borrowings calculated using the effective interest method, interest receivable on funds invested, dividend income and foreign exchange gains and losses. Interest income is recognised in the profit and loss as it accrues, using the effective interest method. Management fees are recognised in the profit and loss as the right to a fee accrues, in accordance with contractual rights.

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F Income tax

The income tax expense for the period presented comprises current and deferred tax. Income tax is recognised in the statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred tax is provided using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised, or to the extent that the group has deferred tax liabilities with the same taxation authority. G Business combination

The acquisition method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the group’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase. G Business combination (continued)

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. H Asset acquisition

When an asset acquisition does not constitute a business combination, the assets and liabilities are assigned a carrying amount based on their relative fair values in an asset purchase transaction and no deferred tax will arise in relation to the acquired assets and assumed liabilities, as the initial recognition exemption for deferred tax under AASB 112 applies. No goodwill will arise on the acquisition.

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I Impairment of assets

The carrying amounts of the company’s assets, other than inventories, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the statement of comprehensive income. The recoverable amount is the greater of the asset’s net selling price and its value in use. In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount and it is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss has been recognised. The reversal is recognised in the income statement. J Financial instruments

(i) Non-derivative financial instruments Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs, except as described below. Subsequent to initial recognition, non-derivative financial instruments are measured as described below. A financial instrument is recognised if the group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the group’s contractual rights to the cash flows from the financial assets expire or if the group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Purchases and sales of financial assets are accounted for at trade date, i.e. the date that the group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the group’s obligations specified in the contract expire or are discharged or cancelled. Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

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J Financial instruments (continued)

(ii) Subsequent measurement Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Details on how the fair value of financial instruments is determined are disclosed in note 2. (iii) Impairment The group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. K Cash and cash equivalents

Cash and cash equivalents comprise cash balances, short-term bills and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the consolidated entity’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. L Trade and other receivables

Trade and other receivables are recorded at amounts due less any allowance for doubtful debts. M Other financial assets

The group classifies its investments in the following categories: loans and receivables. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance date which are classified as non-current assets. Loans and receivables are included in receivables in the statement of financial position. Investments in subsidiaries are carried at cost, net of any impairment. N Property, plant and equipment

(i) Owned assets Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a work condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (“major components”). (ii) Subsequent costs The consolidated entity recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the consolidated entity and the cost of the item can be measured reliably. All other costs are recognised in profit and loss as an expense as incurred.

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N Property, plant and equipment (continued)

(iii) Depreciation With the exception of freehold land and mineral property and development assets, depreciation is charged to profit and loss using a straight value method over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. Mineral property and development assets are depreciated on the units of production basis over the life of the economically recoverable reserves. The estimated useful lives in the current period are as follows: Item Average useful life Plant and equipment 3 to 10 years Software 2.5 years Furniture and fittings 10 years Motor vehicles 3 years The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount. These are included in profit or loss. When revalued assets are sold, it is group policy to transfer any amounts included in other reserves in respect of those assets to retained earnings. O Exploration and evaluation expenditure

Exploration and evaluation costs are allocated separately to specific areas of interest. Each area of interest is limited to a size related to a known and probable Mineral Resource capable of supporting a mining operation. Such costs comprise net direct costs and an appropriate portion of related overhead expenditure directly related to activities in the area of interest. Exploration and evaluation costs incurred in the normal course of operations are written off immediately. Exploration and evaluation costs are capitalised where they are the result of an acquisition from a third party. These capitalised costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. When a decision to proceed to development is made the exploration and evaluation costs capitalised to that area are transferred to mine development within property, plant and equipment. All costs subsequently incurred to develop a mine prior to the start of mining operations within the area of interest are capitalised. These costs include expenditure to develop new ore bodies within the area of interest, to define further mineralisation in existing areas of interest, to expand the capacity of a mine and to maintain production. P Environmental protection and replacement

Expenditures related to ongoing environmental activities are charged against earnings as incurred or capitalised and depreciated depending on their relationship to future earnings. The fair value of the liability for an asset retirement obligation is recognised in the period incurred. The fair value is added to the carrying amount of the associated asset and depreciated over the asset’s useful life. The liability is accreted over time through periodic charges to earnings and it is reduced by actual costs of decommissioning and reclamation. Estimates of decommissioning and reclamation costs could change as a result of changes in regulatory requirements and cost estimates.

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Q Trade and other payables

Trade and other payables are non-interest bearing liabilities stated at cost and settled within 30 days. R Goods and Services Tax / Value Added Tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (“GST”) or Value Added Tax (“VAT”), except where the amount of GST/VAT incurred is not recoverable from the taxation authority. In these circumstances, the GST/VAT is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST/VAT included. The net amount of GST/VAT recoverable from, or payable to, the relevant tax authority is included as a current asset or liability in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis. The GST/VAT components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the relevant tax authority are classified as operating cash flows. S Provisions

A provision is recognised in the statement of financial position when the consolidated entity has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability. T Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the profit and loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not incremental costs relating to the actual draw-down of the facility, are recognised as prepayments and amortised on a straight-line basis over the term of the facility. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the balance date. U Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. If the entity reacquires its own equity instruments, for example as a result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity.

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V Dividends

Dividends are recognised as a liability in the period in which they are declared. W Employee benefits

(i) Short-term employee benefits Wages, salaries, bonuses and other salary related expenses are recognised as expenses in the year in which the associated services are rendered by employees of the company. Short-term accumulating compensated absences such as paid annual leave are recognised when services rendered by employees, that increase their entitlement to future compensated absences, occur. Short-term accumulating compensated absences such as sick leave are recognised when absences occur. (i) Defined contribution plans Employee benefits include statutory social insurance payments to the State Social Insurance Scheme. Contributions to this defined contribution plan are recognised as an expense as incurred.

(ii) Share-based payments The company provides benefits to employees (including directors) of the company in the form of share-based payment transactions, whereby employees render services in exchange for shares or options over shares (“equity-settled transactions”). The fair value of options is recognised as an expense with a corresponding increase in equity (share-based payments reserve). The fair value is measured at grant date and recognised over the period during which the holder become unconditionally entitled to the options. Fair value is determined by an independent valuer using a Black-Scholes option pricing model. In determining fair value, no account is taken of any performance conditions other than those related to the share price of Sunbird (“market conditions”). The cumulative expense recognised between grant date and vesting date is adjusted to reflect the directors best estimate of the number of options that will ultimately vest because of internal conditions of the options, such as the employees having to remain with the company until the vesting date, or such that employees are required to meet internal performance targets. (iii) Share-based payments No expense is recognised for options that do not ultimately vest because internal conditions were not met. An expense is still recognised for options that do not ultimately vest because a market condition was not met. Where the terms of options are modified, the expense continues to be recognised from grant date to vesting date as if the terms had never been changed. In addition, at the date of the modification a further expense is recognised for any increase in fair value of the transaction as a result of the change. Where options are cancelled, they are treated as if vesting occurred on cancellation and any unrecognised expenses are taken immediately to the statement of comprehensive income. However, if new options are substituted for the cancelled options and designated as a replacement on grant date, the combined impact of the cancellation and replacement options are treated as if they were a modification. X Earnings per share

(i) Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for the bonus elements in ordinary shares issued during the year.

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X Earnings per share (continued)

(ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Y Leases

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership. Operating leases – lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term. the difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This liability is not discounted. Any contingent rents are expensed in the period they are incurred. There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting period and on foreseeable future transactions.

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Z New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2014 reporting periods and have not been early adopted by the group. The group’s assessment of the impact of these new standards and interpretations is set out below. Title of standard Nature of change Impact on application Application date AASB 9 Financial Instruments

Amends the requirements for classification, measurement and derecognition of financial assets and financial liabilities.

Adoption of AASB 9 is only mandatory for the year ending 30 Jun 2016. The entity has not yet made an assessment of the impact of these amendments.

1 January 2015

AASB 2012-6 (issued September 2012) Amendments to Australian Accounting Standards - Mandatory Effective Date of AASB 9 and Transition Disclosures

Defers the effective date of AASB 9 to 1 Jan 2015. Entities are no longer required to restate comparatives on first time adoption. Instead, additional disclosures on the effects of transition are required.

As comparatives are no longer required to be restated, there will be no impact on amounts recognised in the financial statements. However, additional disclosures will be required on transition, including the quantitative effects of reclassifying financial assets on transition.

Annual reporting periods beginning on or after 1 Jan 2015

There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

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2. FINANCIAL RISK MANAGEMENT

The group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the group. The group uses different methods to measure different types of risk to which it is exposed. Risk management is carried out by the management under policies approved by the board of directors. Group management identifies, evaluates and hedges financial risks by holding cash in interest earning deposits. The group holds the following financial instruments:

2014 2013 A$ A$

Financial assets Cash and cash equivalents 373,043 3,714,244 Trade and other receivables 867,839 290,763 Total financial assets 1,240,882 4,005,007 Financial liabilities Trade and other payables (1,787,337) (406,850) Finance lease obligation (22,372) (29,710) Borrowings (2,484,763) - Total financial liabilities (4,294,472) (436,560) Net financial instruments (3,053,590) 3,568,447

(a) Market risk Foreign currency risk Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency and net investments in foreign operations. The consolidated entity has the Australian dollar (A$) as its functional currency, which is also the currency for the group’s transactions. Some exposure to foreign exchange risk exists in respect to the South African subsidiaries which have transactions denominated in South African Rand (ZAR). The risk is measured using sensitivity analysis and cash flow forecasting. The group’s exposure to foreign currency risk at the reporting date, expressed in Australian Dollars, was:

Cash and cash equivalents 185,502 471,222 Trade and other receivables 595,978 182,550 Trade and other payables (271,778) (202,143) Total exposure to foreign currency risk 509,702 451,629

Group sensitivity to movements in foreign exchange rates is shown in the summarised sensitivity analysis table below: Foreign exchange risk -10% +10%

Carrying Profit Equity Profit Equity 30-Jun-14 amount A$ A$ A$ A$ A$ Financial assets Cash and cash equivalents 185,502 - (18,550) - 18,550 Trade and other receivables 595,978 - (59,598) - 59,598 Financial liabilities Trade and other payables (271,778) - 27,178 - (27,178)

Net exposure to foreign currency risk 509,702 - (50,970) - 50,970

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2. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued)

Foreign exchange risk -10% +10%

Carrying Profit Equity Profit Equity 30-Jun-13 amount A$ A$ A$ A$ A$ Financial assets Cash and cash equivalents 471,222 - (47,122) - 47,122 Trade and other receivables 182,550 - (18,255) - 18,255 Financial liabilities Trade and other payables (202,143) - 20,214 - (20,214) Net exposure to foreign currency risk 451,629 - (45,163) - 45,163

Foreign exchange volatility was chosen to reflect expected short-term fluctuations in the South African Rand. Price risk The group does not hold investments and therefore is not exposed to equity securities price risk. (b) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities, the ability to meet obligations when due and to close out market positions.. Due to the dynamic nature of the underlying businesses, the management aims at maintaining flexibility in funding by keeping committed credit lines available with a variety of counterparties. Surplus funds are only invested in instruments that are tradeable in highly liquid markets.

The tables below analyse the group’s financial liabilities into relevant maturity groupings. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying amounts as the impact of discounting is not significant.

Less then Total

contractual Carrying

amount of 30-Jun-14 6 months cash flows liabilities Borrowings - 2,484,763 2,484,763 Trade and other payables 1,787,337 1,787,337 1,787,337 Finance lease obligation 5,234 22,372 22,372 Total exposure to liquidity risk 1,792,571 4,294,472 4,294,472

Less then Total

contractual Carrying

amount of 30-Jun-13 6 months cash flows liabilities Trade and other payables 406,850 406,850 406,850 Finance lease obligation 29,710 29,710 29,710 Total exposure to liquidity risk 436,560 436,560 436,560

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2. FINANCIAL RISK MANAGEMENT (CONTINUED) Interest rate risk The group’s exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and liabilities is set out below:

Weighted average

interest rate 30 June

2014

Weighted average

interest rate 30 June

2013 Floating interest rate: Cash available at call 2.40% 123,699 2.76% 3,546,475 Fixed interest rate: Term deposits 2.58% 249,343 4.35% 167,769 Borrowings 20% (2,484,763) - - Finance lease obligation 8.5% (22,372) 8.5% (29,710) Total exposure to interest rate risk (2,134,093) 3,684,534

The group has significant interest-bearing borrowings; however a percentage change in interest rates would not have a material impact on the results. The group’s sensitivity to movement in interest rates is shown in the summarised sensitivity analysis table below:

Interest rate risk -10 bps +10 bps

Carrying Profit Equity Profit Equity 30-Jun-14 amount A$ A$ A$ A$ A$ Cash and cash equivalents 373,043 (373) - 373 - Borrowings (2,484,763) 2,485 - (2,485) - Finance lease obligation (22,372) 22 - (22) - Net exposure to interest rate risk (2,134,092) 2,134 - (2,134) -

Interest rate risk -10 bps +10 bps

Carrying Profit Equity Profit Equity 30-Jun-13 amount A$ A$ A$ A$ A$ Cash and cash equivalents 3,714,244 (3,714) - 3,714 - Finance lease obligation (29,710) 30 - (30) Net exposure to interest rate risk 3,684,534 (3,684) - 3,684 -

Interest rate volatility was chosen to reflect expected short-term fluctuations in market interest rates. (c) Credit risk The carrying amount of cash and cash equivalents and trade and other receivables (excluding prepayments) represent the group’s maximum exposure to credit risk in relation to financial assets. Cash and short-term liquid investments are placed with reputable banks, so no significant credit risk is expected. The group does have any material exposure to a single debtor, namely PetroSA, but no significant credit risk is expected. None of the financial assets are either past due or impaired.

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2. FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Fair value measurements The carrying values less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

A number of the group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. (a) Capitalised exploration and evaluation expenditure The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the company decides to exploit the related lease itself, or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. Factors that could impact future recoverability include the level of reserves and resources, future technological changes, cost of drilling and production, production rates, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices. (b) Income taxes The group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required in determining the provision for income taxes across the group. There are certain transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The group estimates its tax liabilities based on the group’s understanding of the tax law. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. (c) Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at inception. (d) Share-based payment transactions The fair value of share appreciation rights is measured using a Black-Scholes model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

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4. SEGMENT INFORMATION

(a) Description of segments The Company’s Board of Directors, who are collectively the “Chief Operating Decision Maker”, receives financial information for two reportable segments being “Corporate” and “Exploration”. (b) Segment information

Exploration Corporate Eliminations Consolidated For the year ended 30 June 2014 A$ A$ A$ A$ Total segment revenue 9,612 24,951 - 34,563 Profit/(loss) before income tax (5,548,029) (13,737,112) 7,966,740 (11,319,141) Segment assets Property, plant and equipment 35,282 21,295 - 56,577 Exploration and evaluation property 3,754,489 - - 3,754,489 Cash and cash equivalents 185,502 187,541 - 373,043 Trade and other receivable 615,122 252,717 - 867,839 Total segment assets 4,590,395 461,553 - 5,051,948 Segment liabilities Finance lease obligation 22,372 - - 22,372 Trade and other payable 290,919 1,496,418 - 1,787,337 Borrowings - 2,484,763 - 2,484,763 Total segment liabilities 313,291 3,981,181 - 4,294,472

Exploration Corporate Eliminations Consolidated For the year ended 30 June 2013 A$ A$ A$ A$ Total segment revenue - 170,877 - 170,877 Profit/(loss) before income tax (3,583,190) (1,945,071) - (5,528,261) Segment assets Property, plant and equipment 59,597 26,891 - 86,488 Exploration and evaluation property 2,667,019 - - 2,667,019 Deposit for acquisition of subsidiary 1,637,737 - - 1,637,737 Other 2,053,258 5,393,515 (3,441,766) 4,005,007 Total segment assets 6,417,611 5,420,406 (3,441,766) 8,396,251 Segment liabilities Finance lease obligation 29,710 - - 29,710 Trade and other payables 248,933 157,917 - 406,850 Other liabilities 3,027,541 - (3,027,541) - Total segment liabilities 3,306,184 157,917 (3,027,541) 436,560

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5. CORPORATE COSTS

2014 2013 A$ A$

Consultants’ fees 223,235 217,198 Insurance 2,794 15,874 Occupancy 20,164 116,995 Travel 10,202 105,874 Depreciation 913 11,892 Corporate compliance and communication 112,459 298,956 Office and other costs 80,417 215,427 Total corporate costs 450,184 982,216

6. PROFESSIONAL FEES

2014 2013 A$ A$ Services provided by the Auditor – BDO Audit (WA) Pty Ltd Audit and review of financial statements 64,473 43,740 Tax compliance services 14,017 14,907 Total services provided by the Auditor 78,490 58,647 Services provided by network firms of BDO Audit (WA) Pty Ltd Audit and review of financial statements 22,174 11,080 Due diligence audit - 9,393 Total services provided by the Auditor’s network firms 22,174 20,473 Total services provided by BDO Audit (WA) Pty Ltd and network firms 100,664 79,120 Other professional fees Corporate advisory fees 170,000 138,000 Legal fees 65,821 58,923 Capital raising fees 154,189 - Other fees 25,067 - Total other professional fees 415,077 196,923

Total professional fees 515,741 276,043

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7. TAXATION

2014 2013 A$ A$ INCOME TAX EXPENSE (a) The components of tax expense comprise:

Current tax - -

Deferred tax - - Total income tax expense from continuing operation - -

(b) The prima facie tax on profit from ordinary activities before income tax is reconciled to the income tax expense as follows:

Profit Before Income Tax (11,319,141) (5,528,260)

Prima facie tax payable on profit from ordinary activities before income tax at 30% (2013: 30%)

(3,395,742)

(1,658,478)

Tax effect of: - entertainment 4,574 380 - share-based payments 1,227,780 2,100 - non-deductible expenditure - 446,745 - other 225,825 (1,337) - difference in overseas rates 104,721 66,859 - deferred tax assets not brought to account 1,832,820 1,143,731 Income tax expense/(benefit) - - The applicable weighted average effective tax rates are as follows: 0% 0% DEFERRED TAX ASSETS (a) Unrecognised deferred tax assets Timing differences 42,512 4,110 Australian tax losses - revenue 626,744 275,824 Foreign tax losses - revenue 2,578,455 1,206,139 Foreign tax losses - attributable to NCI 301,332 207,560 3,549,043 1,693,633 Offset against deferred tax liabilities recognised - - Deferred tax assets not brought to account 3,549,043 1,693,633

The tax benefits of the above deferred tax assets will only be obtained if:

a. The consolidated entity derives future assessable income of a nature and of an amount sufficient to enable the benefits to be utilised;

b. The consolidated entity continues to comply with the conditions for deductibility imposed by law; and c. No changes in income tax legislation adversely affect the consolidated entity from utilising the benefits.

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8. LOSS PER SHARE

Basic loss per share

The calculation of basic loss per share at the reporting date was based on the loss attributable to ordinary shareholders of A$10,984,239 (2013: A$4,957,434) and a weighted average number of ordinary shares outstanding during the current financial year of 114,759,726 (2013: 103,328,493) shares calculated as follows:

2014 2013 A$ A$

Loss for the year (10,984,239) (4,957,434) Loss attributable to ordinary shareholders Issued ordinary shares at the beginning of the year 112,700,000 100,000,000 Effect of shares issued during the year 2,059,726 3,328,493 Weighted average number of ordinary shares (basic) 114,759,726 103,328,493 Effect of options on issue - - Weighted average number of ordinary shares (diluted) 114,759,726 103,328,493 Basic loss per share (cents) (9.60) (4.80)

Diluted loss per share

Potential ordinary shares are not considered dilutive, thus diluted loss per share is the same as basic loss per share.

9. CASH AND CASH EQUIVALENTS

2014 2013 Cash and cash equivalents consist of: A$ A$ Cash on hand 123,700 3,546,475 Cash in term deposits 249,343 167,769 Cash in escrowed account - 1,122,368 Total cash on hand 373,043 4,836,612 Less: cash in escrowed account - (1,122,368) Total cash and cash equivalents 373,043 3,714,244

Interest rate risk exposure The Group’s exposure to interest rate risk is discussed in note 2.

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10. TRADE AND OTHER RECEIVABLES

2014 2013 A$ A$

Prepayments - 4,366 Deposits 23,054 23,054 GST and VAT receivable 323,455 257,552 Other receivables 521,330 5,791 Total trade and other receivables 867,839 290,763

None of the current receivables are past due. Risk exposure Information about the group's exposure to credit, foreign exchange and interest rate risk is provided in note 2.

11. PROPERTY, PLANT AND EQUIPMENT

Reconciliation of property, plant and equipment – 2014

Plant &

equipment Motor

vehicles Software Furniture

and fittings Total At cost Opening balance as at 1 July 2013 21,203 54,569 2,087 20,796 98,655 Additions 6,403 - 2,083 - 8,486 Disposals (3,063) - - (2,700) (5,763) Effects of foreign currency translation – current year (680) (5,220) (343) - (6,243) Closing balance as at 30 June 2014 23,863 49,349 3,827 18,096 95,135 Accumulated depreciation Opening balance at 1 July 2013 4,497 3,549 1,104 3,017 12,167 Depreciation for the year 5,894 16,449 1,315 3,619 27,277 Disposals (265) - - (81) (346) Effects of foreign currency translation – current year (121) (340) (79) - (540) Closing balance as at 30 June 2014 10,005 19,658 2,340 6,555 38,558 Carrying value Opening carrying value as at 1 July 2013 16,706 51,020 983 17,779 86,488 Additions 6,403 - 2,083 - 8,486 Disposals (2,798) - - (2,619) (5,417) Depreciation for the year (5,894) (16,449) (1,315) (3,619) (27,277) Effects of foreign currency translation – current year (559) (4,880) (264) - (5,703) Closing balance as at 30 June 2014 13,858 29,691 1,487 11,541 56,577

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11. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Reconciliation of property, plant and equipment – 2013

Plant & equipment

Motor vehicles Software

Furniture and fittings Total

At cost Opening balance as at 1 July 2012 12,549 - 585 13,655 26,789 Additions 8,679 54,569 1,502 7,141 71,891 Effects of foreign currency translation – current year (25) - - - (25) Closing balance as at 30 June 2013 21,203 54,569 2,087 20,796 98,655 Accumulated depreciation Opening balance at 1 July 2012 219 - 40 16 275 Depreciation for the year 4,278 3,549 1,064 3,001 11,892 Closing balance as at 30 June 2013 4,497 3,549 1,104 3,017 12,167 Carrying value Opening carrying value as at 1 July 2012 12,330 - 545 13,639 26,514 Additions 8,679 54,569 1,502 7,141 71,891 Depreciation for the year (4,278) (3,549) (1,064) (3,001) (11,892) Effects of foreign currency translation – current year (25) - - - (25) Closing balance as at 30 June 2013 16,706 51,020 983 17,779 86,488

12. EXPLORATION AND EVALUATION EXPENDITURE

As at 30 June 2014, the carrying value of the capitalised exploration and evaluation properties of the consolidated entity was A$3,754,489 (2013: A$2,667,019); the carrying amounts of individual projects are as per the reconciliation of movement in exploration and evaluation property below. Reconciliation of movement in exploration and evaluation property

2014 2013 Note A$ A$

Ibhubesi Gas Project Project carrying value at 1 July 1,915,359 - Initial Payment – Anschutz Overseas Corporation - 720,669 Initial Payment – Forest Oil Netherlands B.V. - 33,632 Initial Payment – Forest Oil Corporation - 659,171 Less: Forest Payment – refundable deposit held as guarantee - (515,368) Forest Payment – deposit consideration upon the Section 11 Approval 515,368 - Forest Payment – escrow funds release upon the Section 11 Approval 1,145,307 - Total Forest Payment capitalised upon completion of acquisition (i) 1,660,675 - Costs incurred during the year 178,455 1,017,255 Project carrying value at 30 June 3,754,489 1,915,359

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12. EXPLORATION AND EVALUATION EXPENDITURE (CONTINUED)

Reconciliation of movement in exploration and evaluation property (continued)

2014 2013 Note A$ A$ Coal Bed Methane (CBM) Project Project carrying value at 1 July 751,660 - Exploration and evaluation property recognised on acquisition of Pretzavest - 312,000 Exploration and evaluation property recognised on acquisition of Greatways - 440,000 Effect of translation to presentation currency 1,089 (340) Impairment (ii) (752,749) Project carrying value at 30 June - 751,660 Total carrying value of capitalised exploration and evaluation at 30 June

3,754,489 2,667,019

The recoverability of the carrying amounts of exploration and evaluation assets is dependent on the successful development and commercial exploitation or sale of the respective areas of interest.

(i) Ibhubesi Gas Project

On 20 December 2012, Sunbird Energy (Ibhubesi) Pty Ltd (“Sunbird Ibhubesi”), a fully owned Australian subsidiary of Sunbird Energy Ltd signed a purchase and sale agreement (“Ibhubesi Agreement”) with Forest Oil Corporation, the Anschutz Overseas Corporation and Forest Oil Netherlands b.v., (collectively referred to as the “Forest”), for acquisition of their collective 76% interest in the Ibhubesi Gas Field - Block 2A (“Ibhubesi Gas Project”), subject to Ministerial approval under Section 11 of the Mineral and Petroleum Resources Development Act, 2002 (“Section 11 Approval”). Total consideration of US$2.5 million payable by Sunbird Ibhubesi for acquisition of the Ibhubesi Gas Project was allocated during the year ended 30 June 3013, as follows:

- the initial payments made to Forest were US$1.471 million, of which US$1 million was paid as consideration and US$0.471 million as a refundable deposit guarantee, subject to the Section 11 Approval; and

- the additional US$1.029 million (“Forest Payment”) was placed in escrow until the Section 11 Approval was received.

On 9 October 2013, Sunbird Ibhubesi received the Section 11 Approval and finalised the acquisition of the Block, upon which the deposit guarantee of US$0.471 million (A$0.515 million) was released as part of acquisition consideration to the Sellers. The acquisition of the Ibhubesi Project was finalised on 20 June 2014, when the Forest Payment of US$1.029 million (A$1.145 million) was released from escrow and paid to Forest. Upon the completion of the transaction both the deposit guarantee and the funds released from escrow, classified as deposits for acquisition of subsidiary in the previous financial year, were capitalised as exploration and evaluation expenditure in the balance sheet. By virtue of the acquisition, the consolidated entity also acquired the control of Forest entities. The transaction was not considered a business combination as the transaction was the acquisition of a single assets, being the interest in the Ibhubesi Gas Project, which did not constitute a business. Accordingly, the cost of the acquisition was fully allocated to the Exploration and Evaluation Expenditure in the balance sheet.

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12. EXPLORATION AND EVALUATION EXPENDITURE (CONTINUED) Deposits for acquisition of subsidiary - reconciliation of movement 2014 2013 A$ A$ Balance at 1 July 1,637,737 - Forest Payment – funds in escrow pending Section 11 Approval - 1,122,369 Forest Payment - deposit guarantee pending Section 11 Approval - 515,368 Effect of foreign currency translation 22,938 - Forest Payment capitalised to Exploration and evaluation expenditure (1,660,675) - Balance at 30 June - 1,637,737

(ii) Coal Bed Methane (CBM) Project

Due to increased uncertainty in regard to recoverability of the CBM Project asset, the consolidated entity reduced the carrying value of the CBM Project asset to A$ nil (2013: A$751,660) during the reporting period, resulting in impairment expense of A$752,749.

13. TRADE AND OTHER PAYABLES

2014 2013 A$ A$ Trade creditors 1,388,598 232,583 Other payables 77,835 93,335 Accruals 320,904 80,932 Total trade and other payables 1,787,337 406,850

Trade and other payables are non-interest bearing liabilities stated at cost and settled within 30 days. Information about the group’s exposure to foreign currency risk is provided in Note 2.

14. BORROWINGS

Borrowings comprised of two loan facilities being a loan from Jamaran Australia Pty Ltd (“Jamaran Loan”) of US$300,000 (A$329,813), and a loan facility with White Swan Nominees Pty Ltd (“White Swan Loan Facility”) for a secured loan facility of up to A$5 million. Jamaran Loan The Jamaran Loan was concluded on 14 February 2014, was unsecured and accrued interest at 6% per annum calculated daily, with an establishment fee of 2% of the principal amount. The repayment date was three months from the date on which the loan was made to Sunbird, and was repaid in full, including interest and establishment fees, on 29 May 2014.

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14. BORROWINGS (CONTINUED) White Swan Loan facility The White Swan Loan Facility was arranged on 24 February 2014 and attracted interest at 20% per annum. The loan agreement provided for the drawdown in tranches as the working capital requirements of the Company demand the use of such funds, and the aggregate loan drawn down in tranche payments is repayable within twelve (12) months of the first drawdown of funds. The Company expects to repay the loan drawn within the period of twelve (12) months by the application of funds procured from alternate debt or equity or debt/equity raising strategies that will be available to the Company within that period. The Loan Facility agreement provides that upon such repayment of the Loan Facility, the Security shall be discharged and released. The 12 month Loan Facility is secured against Sunbird’s beneficial interest in the shares of its wholly owned subsidiary, Anschutz South Africa Corporation, which holds an indirect participating interest of 22.8% in the South African Block 2A Production Right which incorporates the Ibhubesi Gas Project. Security on the Loan Facility was subject to a grant of a waiver by ASX of Listing Rule 10.1 due to White Swan being a related party within the definitions prescribed by the Corporations Act 2001 and the ASX Listing Rules, which was received on 5 March 2014, subject to certain conditions. On 12 June 2014, the White Swan Loan Facility was varied as follows: - Interest upon the moneys secured being capitalised at monthly intervals unless the Company, at its election on or

before each monthly interest payment date, decides to pay the accrued monthly interest at such times; - The Lenders, be granted concurrent options to elect to convert part or all of the amount of the loan drawn down

from time to time, to ordinary fully paid shares in the capital of the Company at a conversion price: o of $0.25 per share during the term of the White Swan Loan Facility; or o if such election is made within 20 Business Days of the Company raising capital during the term of the

White Swan Loan Facility, at the lesser of $0.25 and the price per share at which the Company raises capital within the term of the White Swan Loan Facility;

- the security to the Lender continuing to be in the form of a pledge of shares in a Sunbird wholly owned subsidiary entity (“Security”) which holds a beneficial interest of 22.8% in the South African Block 2A Production Right which incorporates the Ibhubesi Gas Project.

At 30 June 2014, the total secured liabilities are as follows:

2014 2013 A$ A$

White Swan Loan Facility 2,400,000 - White Swan Loan Facility - Capitalised interest 84,763 - Total borrowings 2,484,763 - Total facilities White Swan Loan Facility 5,000,000 - Total facilities 5,000,000 - Used at the reporting date White Swan Loan Facility 2,400,000 - Total facilities 2,400,000 - Unused at the reporting date White Swan Loan Facility 2,600,000 - Total facilities 2,600,000 -

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15. SHARE CAPITAL

The group’s capital is comprised of ordinary shares and options over ordinary shares of the Company.

2014 2013 A$ A$

Shares on issue 15,527,725 15,452,725 Issuance cost (1,189,690) (1,189,690) Total share capital 14,338,035 14,263,035

Reconciliation of movement in issued capital Date Number of

shares A$ Balance as at 1 July 2012 100,000,000 9,583,787 Issue of shares – sophisticated investors (12,500,000 @ A$0.40) 26-Mar-13 12,500,000 5,000,000 Issue of unlisted options (1,000,000 @ A$0.001) 11-Jun-13 - 1,000 Issue of shares – consultant retention(200,000 @ A$0.00) 19-Jun-13 200,000 - Issuance cost - (321,752) Balance as at 30 June 2013 112,700,000 14,263,035

Balance as at 1 July 2013 112,700,000 14,263,035 Issue of shares – conversion of performance options (3,050,000 @ A$0.00)

30-Jun-14 200,000 -

Issue of shares – exercise of options (375,000 @ A$0.20) 24-Feb-14 375,000 75,000 Issue of shares – conversion of performance options (3,050,000 @ A$0.00)

11-Nov-13 3,050,000 -

Balance as at 30 June 2014 116,325,000 14,338,035 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in the proportion to the number and amount paid on the shares held. Options over ordinary shares

At 30 June 2014, the company had 100,500,000 (2013: 97,875,000) unlisted options over ordinary shares on issue.

Reconciliation of movement in unlisted options over ordinary shares Number Issue date Expiry date

Exercise price (cents)

Total unlisted options as at 1 July 2012 90,000,000 Argonaut engagement 1,000,000 11-Jun-13 30-Nov-15 50 Sign on and retention options 500,000 1-Feb-13 31-Dec-15 20 Sign on and retention options 375,000 1-May-12 24-Feb-14 20 Sign on and retention options 1,000,000 1-Jan-13 4-Nov-16 25 CBM performance options 1,000,000 1-Jan-13 4-Nov-16 25 Ibhubesi performance options 3,000,000 13-Dec-12 31-Dec-15 20 Ibhubesi performance options 1,000,000 1-Feb-13 31-Dec-15 20 Total unlisted options as at 30 June 2013 97,875,000

Total unlisted options as at 1 July 2013 97,875,000 Merchant engagement - Retention options 1,000,000 21-May-13 1-Oct-16 50 Merchant engagement - Incentive options 2,000,000 21-May-13 1-Oct-16 50 Sign on and retention options exercised (375,000) 24-Feb-14 Total unlisted options as at 30 June 2014 100,500,000

Options over ordinary shares carry no voting or dividend rights.

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15. SHARE CAPITAL (CONTINUED) Capital risk management The group's objectives when managing capital are to safeguard their ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

16. RESERVES

2014 2013 A$ A$

Share-based payments reserve 4,735,803 643,203 Foreign currency translation reserve 33,146 83,820 Total reserves 4,768,949 727,023

Reconciliation of movement in reserves Share-based payments reserve Balance as at 1 July 643,203 76,833 Equity settled share-based payments expense 4,092,600 566,370 Balance as at 30 June 4,735,803 643,203

Foreign currency translation reserve Balance as at 1 July 83,820 (8,255) Effect of foreign currency translation (50,674) 92,075 Balance as at 30 June 33,146 83,820 Total reserves balance as at 30 June 4,768,949 727,023

Share-based payments reserve The share-based payments reserve represents the value of options issued under the compensation arrangement that the consolidated entity is required to include in the consolidated financial statements. No gain or loss is recognised in the profit or loss on the purchase, sale, issue or cancellation of the consolidated entity’s own equity instruments.

Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentation currency of the reporting entity.

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17. INTERESTS IN OTHER ENTITIES

(a) Material subsidiaries The consolidated entity’s principal subsidiaries at 30 June 2014 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the consolidated entity, and the proportion of ownership interests held equals the voting rights held by the consolidated entity. The country of incorporation or registration is also their principal place of business. Principal activity of all subsidiaries is gas exploration and development.

Place of Ownership interest held by

business/ country of

the consolidated entity

non-controlling interests

incorporation 2014 2013 2014 2013 Pretzavest 37 Pty Ltd South Africa 74% 74% 26% 26% Greatways Holdings (BVI) Ltd BVI 100% 100% - - Sunbird Energy (SA) Pty Ltd South Africa 100% 100% - - Sunbird Australia (Mozambique) Pty Ltd Australia 100% 100% - - Sunbird Energy (Ibhubesi) Pty Ltd Australia 100% 100% - -

(b) Non-controlling interests

Set out below is summarised financial information of Pretzavest 37 Pty Ltd, which has non-controlling interests. The amounts disclosed are before inter-company eliminations. 2014 2013 Summarised balance sheet A$ A$ Current assets 279,758 653,612 Current liabilities 274,671 207,546 Current net assets 5,087 446,066 Non-current assets 35,282 59,597 Non-current liabilities 3,109,558 2,198,378 Non-current assets (3,074,276) (2,138,781) Net assets (3,069,189) (1,692,715) Accumulated NCI (764,185) (429,283)

Summarised statement of comprehensive income Revenue - - Loss for the period (1,600,084) (2,195,489) Other comprehensive income 223,611 (41,626) Total comprehensive income (1,376,473) (2,237,115) Loss allocated to NCI (334,902) (570,827)

Summarised cash flows Cash flows from/(used in) operating activities (888,819) (2,241,767) Cash flows from/(used in) investing activities - - Cash flows from/(used in) financing activities 596,890 2,112,302 Net increase/(decrease) in cash and cash equivalents (291,929) (129,465)

(c) Transactions with non-controlling interests

There were no transactions with the non-controlling interests during the reporting period.

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18. RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH OUTFLAW USED

2014 2013 A$ A$

Loss after taxation (11,319,141) (5,528,261) Add/(less) non-cash items: Depreciation 28,240 11,892 Share-based payments expense 4,092,600 566,370 Impairment of investment (i) 752,749 - Accrued interest expense 84,763 - Brokerage fees - Financing cash flows 154,189 - Finance fees - financing cash flows 5,428 - Foreign currency translation reserve (ii) 98,452 83,803 Changes in working capital: Increase in trade and other receivables (577,077) (54,494) Increase in trade and other payables 1,380,487 87,207 Net cash outflow used (5,299,310) (4,833,483)

Non-cash investing and financing activities

(i) During the reporting period the consolidated entity reduced the carrying value of the CBM Project to nil which gave rise to the impairment charge of A$752,749.

(ii) The foreign currency translation reserve amount of $98,452 results from the translation of capitalised Exploration and Evaluation Expenditure at 30 June 2014.

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19. PARENT ENTITY

2014 2013 A$ A$ Current assets 440,258 4,444,767 Non-current assets 4,298,399 6,174,918 Total assets 4,738,657 10,619,685 Current liabilities 3,981,181 153,690 Total liabilities 3,981,181 153,690 Net assets 757,476 10,465,995 Contributed equity 14,338,035 14,263,035 Share-based payment reserve 4,735,803 643,203 Foreign currency translation reserve - 134,200 Accumulated losses (18,316,362) (4,574,443) Total equity 757,476 10,465,995 Loss for the year (13,737,852) (2,751,036) Total comprehensive loss for the year (13,737,852) (2,751,036)

Commitments There were no commitments at 30 June 2014. Contingencies There were no contingent assets or liabilities of the parent as at 30 June 2014 (30 June 2013: A$ NIL). Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity and some of its subsidiaries are party to a deed of cross guarantee under which each company guarantees the debts of the others.

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20. RELATED PARTY TRANSACTIONS

(a) Parent entities The ultimate parent entity within the group is Sunbird Energy Ltd incorporated in Australia. (b) Subsidiaries Interests in subsidiaries are set out in note 17(a). (c) Loans to/from related parties The following table sets out the loans to or from related parties at the current and previous reporting date:

2014 2013 Loan to Loan from A$ A$ Pretzavest 37 Pty Ltd Sunbird Energy Ltd 3,493,615 2,366,686 Forest Exploration (SA) Pty Ltd Sunbird Energy Ltd 4,459,496 368,243 Anschutz Overseas (SA) Pty Ltd Forest Exploration (SA) Pty Ltd 1,098,997 87,099 Forest Exploration (SA) Pty Ltd Pretzavest 37 Pty Ltd 397,832 186,272

(d) Other related party transactions A related party entity to Andrew Leibovitch, namely Serval Enterprises, was paid A$1,145 (2013: A$nil). Umbono Capital Partners (Proprietary) Limited (“Umbono”), a party related to Kerwin Rana, are operators of the group’s South African projects. During the reporting period a total of A$600,000 (2013: A$600,000) was due to Umbono for their services, of which $200,000 remains unpaid (2013: A$nil). During the reporting period, the company incurred and fully paid A$59,382 (2013: A$37,500) for legal services to MB Law Services Pty Ltd, the entity related to Mark Balfour. All transactions were made on normal commercial terms and conditions and at market rates. There were no other transactions with related parties during the reporting period.

(e) Key management personnel The following persons were directors and key management personnel of Sunbird Energy Ltd during the financial year:

(i) Executive Chairman Mr K Rana (ii) Executive directors Mr W Barker, Managing Director Mr A Leibovitch, Executive Director (iii) Non-executive director Mr M Gracey (iv) Key management personnel Mr N Rayner, Technical Director

Mr M Balfour, General Counsel and Company Secretary Ms C Mackay, Chief Financial Officer

There were no other persons, beside the Directors and Executive Management, identified as key management personnel of the Company during the reporting period.

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20. RELATED PARTY TRANSACTIONS (CONTINUED)

(f) Key management personnel compensation The key management personnel compensation was as follows:

2014 2013 A$ A$

Short-term employee benefits 1,620,180 817,650 Post-employment benefits 67,063 30,375 Share-based payment 2,673,897 342,212 Total key management personnel compensation 4,361,140 1,190,237

Directors and executive fees, included in the short-term benefits, were paid to entities related to key management personnel as follows:

2014 2013 Related entity Key management person A$ A$ Stratosphere Consulting Group Marcus Gracey - 31,750 Ballymoyer Pty Ltd William Barker 387,292 288,675 Crest Corporation Pty Ltd Andrew Leibovitch 241,689 199,458 Khanyile Consulting Limited Kerwin Rana 124,833 -

As at 30 June 2014, the following amounts remain unpaid in respect to those transactions:

2014 2013 Related entity Key management person A$ A$ Stratosphere Consulting Group Marcus Gracey - - Ballymoyer Pty Ltd William Barker 178,750 - Crest Corporation Pty Ltd Andrew Leibovitch 111,479 - Khanyile Consulting Limited Kerwin Rana 124,833 -

Detailed remuneration disclosures are provided in the remuneration report on pages 7 to 18.

21. SHARE-BASED PAYMENTS

(a) Employee and other options and rights over ordinary shares

The company has no formal document under which options and rights are issued. Decisions to grant options and rights are made by the Board and are based on aligning the long-term interests of key management personnel, employees, consultants and strategic external parties with those of the company’s shareholders.

Options and rights are granted for no consideration, are subject to vesting conditions and carry no dividend or voting rights.

The exercise price of options is based on the weighted average price at which the company’s shares are traded on the Australian Securities Exchange (ASX) on or about the date of grant.

Each option and right is convertible into one ordinary share upon vesting.

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21. SHARE-BASED PAYMENTS (CONTINUED)

Share options granted during the reporting period

2014 2013

Average exercise price

per option Number of

options

Average exercise price

per option Number of

options As at 1 July 21.7 97,875,000 21.7 90,375,000 Granted during the year 50.0 3,000,000 22.3 7,500,000 Exercised during the year 20.0 (375,000) - - As at 30 June 22.6 100,500,000 21.7 97,875,000 Vested and exercisable at 30 June

Weighted average share price at the date of exercise of options exercised during the year ended 30 June 2014 was 30 cents (2013: 35 cents).

Share options outstanding at the end of the year

Exercise price Number of options Grant date Expiry date (cents) 2014 2013 9-Oct-13 1-Oct-16 50 3,000,000 -

21-May-13 30-Nov-15 25 1,000,000 1,000,000 1-Jan-13 2-Jul-16 20 500,000 500,000 1-Feb-13 2-Jan-17 20 500,000 500,000 1-Feb-13 4-Nov-16 20 1,000,000 1,000,000 1-Feb-13 31-Dec-15 20 250,000 250,000 1-Feb-13 31-Dec-16 20 250,000 250,000 1-Feb-13 31-Dec-15 25 1,000,000 1,000,000

13-Dec-12 31-Dec-15 25 2,000,000 2,000,000 13-Dec-12 31-Dec-15 30 1,000,000 1,000,000 1-May-12 24-Feb-14 20 - 375,000 12-Oct-11 19-Jan-15 20 4,000,000 4,000,000 12-Oct-11 19-Jan-16 20 4,000,000 4,000,000 12-Oct-11 19-Jan-17 20 4,000,000 4,000,000 13-Oct-11 19-Jan-15 20 13,000,000 13,000,000 12-Oct-11 4-Nov-16 25 5,000,000 5,000,000 12-Oct-11 4-Nov-16 30 5,000,000 5,000,000 12-Oct-11 12-Nov-16 25 5,000,000 5,000,000 12-Oct-11 12-Nov-16 30 5,000,000 5,000,000 12-Oct-11 19-Jan-15 20 5,000,000 5,000,000 23-Jan-12 19-Jan-15 20 40,000,000 40,000,000

100,500,000 97,875,000 Weighted average remaining contractual life of options outstanding at 30 June 2014 is 1.2 years (2013: 2.1 years).

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21. SHARE-BASED PAYMENTS (CONTINUED)

Performance rights granted during the reporting period

During the year ended 30 June 2014, the company issued the following performance rights:

2014 2013 Number of rights Number of rights

As at 1 July 12,000,000 - Granted during the year 400,000 12,000,000 Exercised during the year (3,250,000) - As at 30 June 9,150,000 12,000,000 Vested and exercisable at 30 June 200,000 375,000

Weighted average share price at the date of exercise of performance rights exercised during the year ended 30 June 2014 was 47 cents (2013: not applicable)

Performance rights outstanding at the end of the year

Number of rights Expiry date 2014 2013 1-Nov-13 - 100,000 1-May-14 - 200,000 1-May-15 8,850,000 11,400,000 1-May-15 200,000 200,000 1-Nov-15 100,000 100,000

9,150,000 12,000,000 Weighted average remaining contractual life of performance rights outstanding at 30 June 2014 is 0.8 years (2013: 1.8 years).

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21. SHARE-BASED PAYMENTS (CONTINUED) (b) Fair value

Fair value of share options

The assumptions used in calculating the fair value of options granted during the reporting year and the comparative period are set out in the tables below. For options granted during the year ended 30 June 2014

Code Number

Exercise price

(cents) Grant date

Expiry date

Share price

(cents) Price

volatility

Expected dividend

yield Risk-free

rate Fair value

(cents) SNYOR9 1,000,000 50 09-10-13 01-10-16 39 100% 0% 2.97% 19 SNYOR10 2,000,000 50 09-10-13 01-10-16 39 100% 0% 2.97% 19 3,000,000

For options granted during the year ended 30 June 2013

Code Number

Exercise price

(cents) Grant date

Expiry date

Share price

(cents) Price

volatility

Expected dividend

yield Risk-free

rate Fair value

(cents) SNYOR4 1,000,000 25 21-05-13 30-11-15 38 100% 0% 2.46% 38 SNYOR4 250,000 20 01-01-13 02-07-16 25 100% 0% 2.46% 11 SNYOR4 250,000 20 01-01-13 02-07-16 25 100% 0% 2.46% 11 SNYOR4 250,000 20 01-01-13 02-01-17 25 100% 0% 2.46% 12 SNYOR4 250,000 20 01-01-13 02-01-17 25 100% 0% 2.46% 12 SNYOP6 500,000 20 01-01-13 04-11-16 25 100% 0% 2.46% 11 SNYOP6 500,000 20 01-01-13 04-11-16 30 100% 0% 2.46% 11 SNYOR3 250,000 20 01-02-13 31-12-15 18 100% 0% 2.46% 8 SNYOR3 250,000 20 01-02-13 31-12-16 18 100% 0% 2.46% 9 SNYOP6 1,000,000 25 01-02-13 31-12-15 18 100% 0% 2.46% 9 SNYOP6 2,000,000 25 13-12-12 31-12-15 15 100% 0% 2.46% 7 SNYOP7 1,000,000 30 13-12-12 31-12-15 15 100% 0% 2.46% 7

7,500,000 The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on the Black-Scholes option-pricing model. The contractual life of the option is used as an input into this model. Expectations of early exercise are incorporated into the Black-Scholes option-pricing model. The expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility due to publicly available information. Share options are granted under a service condition and, for grants to key management personnel, market and non-market performance conditions. Non-market performance conditions are not taken into account in the grant date fair value measurement of the services received. During the reporting period, no options (2013: 1,500,000) were granted to key management personnel as long-term incentives to deliver long-term shareholder returns.

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21. SHARE-BASED PAYMENTS (CONTINUED) Fair value of performance rights

For performance rights granted during the year ended 30 June 2014

Code Number Grant date Expiry date Share price

(cents) Price

volatility

Expected dividend

yield Risk-free

rate Fair value

(cents) SNYPR5 400,000 01-07-13 01-05-15 35 85% 0% 2.46% 35

400,000 For performance rights granted during the year ended 30 June 2013

Code Number Grant date Expiry date Share price

(cents) Price

volatility

Expected dividend

yield Risk-free

rate Fair value

(cents) SNYPR1 100,000 01-05-13 01-11-13 35 85% 0% 2.46% 35 SNYPR2 200,000 01-05-13 01-11-13 35 85% 0% 2.46% 35 SNYPR4 200,000 01-05-13 01-05-15 35 85% 0% 2.46% 35 SNYPR5 10,400,000 30-04-13 01-05-15 35 85% 0% 2.46% 35 SNYPR5 1,000,000 01-05-13 01-05-15 35 85% 0% 2.46% 35 SNYPR4 100,000 01-05-13 01-11-15 35 85% 0% 2.46% 35

12,000,000 (c) Expenses arising from share-based payment transactions

2014 2013 A$ A$

Options expense 1,104,789 341,117 Rights expense 2,987,811 225,253 Total share-based payments expense 4,092,600 566,370

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22. EVENTS OCCURRING AFTER REPORTING DATE

Matters or circumstances have arisen since the end of the financial year which have significantly affected or may significantly affect the operations, results or state of affairs of the group in future financial years which have not been disclosed publicly at the date of this report are: Umbono Loan Facility On 10 August 2014, the consolidated entity arranged the Umbono Loan Facility of A$2,500,000 with Umbono Capital Partners LLC and Umbono Finacial Services (Pty) LTD (collectively referred to as “Umbono”). The loan agreement provides for the drawdown in tranches as the working capital requirements of the Company demand the use of such funds, and the aggregate loan drawn down in tranche payments is repayable within twelve (12) months of the first drawdown of funds. Interest on the amount of facility used is 20% per annum, calculated daily and payable monthly. Subject to shareholder approval, at the election of Umbono, the outstanding amount of the Facility may be converted from debt to equity in the Company and, thereby, potentially avoid the necessity for the Company to repay the whole or part of the Facility converted to equity, by alternate capital raisings or debt funding. Vandasia share subscription On 9 September 2014, a transaction was concluded with Vandasia Investments Limited (“Vandasia”), for Vandasia to acquire a 43.9% interest in Sunbird via a two stage transaction involving two capital raisings at the equivalent weighted average price of approximately AUD$0.34 per share and the acquisition and conversion of 47.75m existing AUD$0.20 options. Overall, the transaction is priced at a premium of 79% to Sunbird's last traded share price. The first stage of the investment, being the issue of 20,367,127 fully paid shares for an aggregate subscription amount of USD$5,000,000 (A$5,353,500), is due for completion within 10 business days and represents a premium of 39.5% to the Company’s last traded share price. The second stage of the investment (which is subject to shareholder approval and execution of a Gas Sales Term Sheet with a potential customer) includes the issue of an additional 23,021,757 shares to Vandasia for an aggregate subscription amount of approximately USD$9,350,000 (A$10,011,045), and the purchase and conversion 47.75m options, which will result in the Company receiving approximately an additional US$8,850,000 (A$9,475,695 - subject to exchange rates). Stage 1

The Company will issue Vandasia 20,367,127 fully paid shares for an aggregate subscription amount of USD$5,000,000 (A$5,353,500) (Tranche 1 Shares) pursuant to the terms of a share subscription agreement (Share Subscription Agreement). This equates to a price per share of approximately AUD$0.265 based on current exchange rates, being a premium of 39.5% to the last traded share price on 8 September 2014. The Tranche 1 Shares will be issued pursuant to the Company's current capacity under Listing Rule 7.1 and Listing Rule 7.1A. Following issue of the Tranche 1 Shares, Vandasia will hold 14.9% of the Company's issued capital and will be entitled to nominate one director. Vandasia intends to nominate Mr. Niyi Oyedele to serve as its representative on the Sunbird board of directors. Stage 2

Subject to meeting conditions precedents by no later than 30 November 2014, including execution of a Gas Sales Term Sheet with a potential customer and shareholder approval under item 7 of section 611 of the Corporations Act, the Company will issue 23,021,757 shares to Vandasia (Tranche 2 Shares) for an aggregate subscription amount of approximately USD$9,350,000 (A$10,011,045) pursuant to the terms of the Share Subscription Agreement. Simultaneously with the issue of the Tranche 2 Shares, Vandasia will purchase and exercise 47,750,000 existing AUD$0.20 options pursuant to the terms of an option sale agreement (Option Sale Agreement). The conversion of options will provide Sunbird with AUD$8,550,000 (A$9,475,695) in additional capital (subject to exchange rates) and will see Vandasia issued with a further 47,750,000 shares (Option Shares). The conversion of the options will be the subject of a separate shareholder resolution pursuant to item 7 of section 611 of the Corporations Act. Besides the above, no matters or circumstances have arisen since the end of the financial year which have significantly affected or may significantly affect the operations, results or state of affairs of the group in future financial years which have not been disclosed publicly at the date of this report.

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23. CAPITAL AND OTHER COMMITMENTS

There were no commitments in the parent entity or the group at 30 June 2014 (30 June 2013: A$ NIL), other than a finance lease commitment made by Pretzavest 37 Pty Ltd amounting to A$22,372 (2013: A$29,710) for the purchase of a motor vehicle repayable over 5 years at 8.5% per annum.

24. CONTINGENCIES

The group had contingent liabilities at 30 June 2014 of A$167,343 (R1,670,087) (2013: A$99,434 (R897,418)) in respect to the restoration and rehabilitation bonds held by the Petroleum Agency South Africa (PASA). In addition, nder the Ibhubesi Agreement and, in addition to the Initial Payments and the Forest Payment, conditional on Sunbird Ibhubesi achieving certain project milestones and commercial development success, the following enhancement payments are also payable to Forest, Anschutz Overseas and Forest Netherlands, subject to stated conditions:

• A total of US$5 million (A$5.47 million) payable on execution of a Gas Sales Agreement • A total of US$10 million (A$10.94 million) on Final Investment Decision or First Gas Sales

Further under the Ibhubesi Agreement, the following enhancement payment is also payable to Forest and Anschutz Overseas from Block produced gas sales achieved during the term of the Production Right for the Block and any extension thereof:

• A total of Sales Enhancement Fee equal to 0.76% of net gas sales revenues These liabilities have not been brought to account in these financial statements as the contractual cash flow only arises upon the occurrence of the above milestones. Should the milestones not occur, no further amounts are payable by Sunbird to the Sellers under the Ibhubesi Agreement.

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For personal use only - ASX · Until his resignation from office on 15 May 2012, Mr Barker was a non-executive director of Transerv Energy Limited. Mr Andrew Leibovitch – Executive

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